Court File and Parties

Court File No.: FC-15-48656-00 Date: 2019-08-08 Superior Court of Justice – Ontario

Between: Mary F. Alajajian, Applicant

• and - Arthur Alajajian, Respondent

Counsel: Elliot Birnboim, for the Applicant Dani Z. Frodis and Charley Levitan, for the Respondent

Heard: May 15 – 18, 2018, May 22 – 25, 2018, May 28, 2018, November 19, 21 – 23, 2018

Corrected: Counsel Charley Levitan added on front page, paragraph 107 amended to read s. 14 of the Family Law Act and paragraph 139 and 140 have been inserted.

Reasons for Judgment

McLEOD, J

[1] The parties met in 1986 and were married in July of 1988. There are three children of the marriage; "Arman" (date of birth, 12 May 1990), "Tatyana" (date of birth, 30 July 1992) and "Brianna" also known as "Angelina" (date of birth, 1 October 1999). The date of separation is 14 June 2015. (Throughout the proceeding, the parties used a valuation date of 14 June 2015. There was some suggestion that the valuation date was March 2015. However, the court received no evidence on this point and all of the financial statements filed used the 14 June 2015 date. Exhibit 44 titled "Comparison of Differences in Net Family Property Statement" also used this date. Therefore, I find that for purposes of calculating the parties' Net Family Properties, 14 June 2015, is the valuation date.)

[2] On the date of separation, the only "child of the marriage" as defined under the Divorce Act is "Angelina". Angelina turned 18 on 1 October 2017. She commenced a college nursing program in January of 2018.

[3] The applicant ("Mary") has a diploma in makeup artistry. Mary worked on a very, very limited basis throughout the marriage.

[4] The respondent ("Arthur") has worked in the jewellery industry over the course of the marriage. He incorporated a business ("Ital-Can").

[5] On the date of separation, the parties owned two pieces of real estate; the matrimonial home ("331 Binns") and a second property acquired in 2005 ("Greenvalley"), construction on this land commenced in 2010. Following separation, Arthur and the three children continued to reside in the matrimonial home while Mary obtained an order of exclusive possession for Greenvalley.

The Issues

1. Equalization (issues arising in this determination). i) presumption of resulting trust; ii) exclusion of gifts; and iii) tracing of inheritance.

2. Support (issues arising in this determination). i) imputation of income; ii) unrecorded income; and iii) intentional underemployment.

The Position of the Parties on Equalization

[6] The applicant submits that once the court has made a determination of each parties' NFP, then the applicant should receive more than one half of the difference between the parties' NFP in accordance with subsection 5(6) of the Family Law Act.

[7] The respondent submits that once the court has determined the value of those items in dispute, that an equalization payment of one-half of the difference between the parties' NFP should be ordered.

[8] Sections 4 and 5 of the Family Law Act require determination of ownership and then a calculation which results in one spouse paying money to the other (see Rawluck v. Rawluck, 1990 Carswell Ont 217 (SCC)). In this case, deductions are requested with respect to gifts and inheritances pursuant to s. 4(2) of the Family Law Act. There are also issues as to the values of assets and debts as of the date of marriage.

[9] Subsection 4(3) of the Family Law Act creates an onus on the party of proving deductions exclusions from that parties' net family property.

The Position of the Parties with Respect to Support

[10] Mary submits that Arthur has substantial unreported income and that as a result the court should impute income above Arthur's declared line 150 income.

[11] Arthur submits that his income for spousal support purposes should be based upon the income valuation report tendered by his expert, Ms. Paula White.

[12] Arthur further submits that income should be attributed to Mary for child support purposes given that she has intentionally underemployed herself and that she has made no child support payment in favour of Angelina. Arthur further submits that Mary should be contributing specifically to Angelina's s. 7 expense relating to her college program.

Credibility

[13] In opening statements both counsel acknowledged that there were wildly different versions of the facts as between the parties, and specifically that the "case was centrally contingent upon findings of credibility".

[14] Accordingly, and before commencing the analysis of evidence, it is necessary to briefly review the law on credibility.

[15] In Deschenes v. Deschenes, Justice Paris set out some guidelines for determining credibility in family law cases.

a) The ability to consider inconsistencies and weaknesses in the witness's evidence, which includes internal inconsistencies, prior inconsistent statements, inconsistencies between the witness' testimony and the testimony of other witnesses.

b) The ability to review independent evidence that confirms or contradicts the witness' testimony.

c) The ability to assess whether the witness' testimony is plausible or, as stated by the British Columbia Court of Appeal in Faryna v. Chorny, 1951 BCCA 252, 1951 CarswellBC 133, it is "in harmony with the preponderance of probabilities which a practical [and] informed person would readily recognize as reasonable in that place and in those conditions", but in doing so I am required not to rely on false or frail assumptions about human behavior.

d) It is possible to rely upon the demeanor of the witness, including their sincerity and use of language, but it should be done with caution (R. v. Mah, 2002 NSCA 99 ¶¶ 70-75).

e) Special consideration must be given to the testimony of witnesses who are parties to proceedings; it is important to consider the motive that witnesses may have to fabricate evidence. R. v. J.H. 2005 ONCA 253, [2005] O.J. No.39 (OCA) ¶¶ 51-56).

There is no principle of law that requires a trier of fact to believe or disbelieve a witness's testimony in its entirety. On the contrary, a trier may believe none, part or all of a witness's evidence, and may attach different weight to different parts of a witness's evidence. (See R. v. D.R. [1966] 2 S.C.R. 291 at ¶ 93 and R. v. J.H. supra).

(See: Novak Estate, re, 2008).

[16] Recently in Dunford v. Hamill, 2018 ONSC 3421, Justice Jarvis cited Baker-Warren v. Denault and adopted the following observations on the assessment of a witness' credibility at trial.

These include internal and external consistency of witness testimony with the testimony of other witnesses and the documentary evidence, motive, self-interest, clarity and logic of narrative, witness presentation (distinguishing candor from evasive or strategic testimony) and, to a lesser degree, witness demeanor. This list is not exhaustive. Assessing credibility is, in every respect, a holistic undertaking incapable of precise formulation.

[17] In addition, if the credibility of a witness is going to be challenged by calling contradictory evidence, then the rule in Browne v. Dunn must be followed. Justice Moldhaver in the appeal decision of R v. McNeil, (2000) analyzed the rule in Browne v. Dunn and made the following comments when defining the rule and understanding its purpose.

The rule in Browne v. Dunn was succinctly stated by Labrosse J.A. in R. v. Henderson, supra, at p. 141:

This well-known rule stands for the proposition that if counsel is going to challenge the credibility of a witness by calling contradictory evidence, the witness must be given the chance to address the contradictory evidence in cross-examination while he or she is in the witness-box.

In R. v. Verney (1993), 1993 ONCA 14688, 87 C.C.C. (3d) 363 (Ont. C.A.) at 376, Finlayson J.A. outlined the purpose and ambit of the rule?

Browne v. Dunn is a rule of fairness that prevents the "ambush" of a witness by not giving him an opportunity to state his position with respect to later evidence which contradicts him on an essential matter. It is not, however, an absolute rule and counsel must not feel obliged to slog through a witness's evidence-in-chief, putting him on notice of every detail that the defence does not accept. Defence counsel must be free to use his own judgment about how to cross-examine a hostile witness. Having the witness repeat in cross-examination, everything he said in-chief, is rarely the tactic of choice. For a fuller discussion on this point, see Palmer and Palmer v. The Queen (1979), 1979 SCC 8, 50 C.C.C. (2d) 193 at pp. 209-10, [1980] 1 S.C.R. 759, 14 C.R. (3d) 22 (S.C.C.).

[18] In Green v. Reed, Justice Baird made the following comments concerning credibility.

...and at the end of the day it is the trier of fact who makes findings on credibility within the context of the evidence as a whole, and this is not a scientific exercise. It arrives after due consideration of facts, the vested interest, the corroboration or lack thereof with respect to the allegations and statements of fact. And after considering the above and weighing the evidence, the trier or fact, in this case, the trial judge is the best independent person to make such a determination.

The credibility of a party or a witness is a slender thread which can be weakened or broken in an instant. A witness, while testifying, particularly in those cases where a finding of credibility is integral to the outcome, builds a relationship with the court, and that relationship starts with the pleadings, the pretrial motions, the theory or thesis advanced by counsel and finally, the testimony of the party and collateral witnesses.

(See: Green v. Reed, 2012 Carswell Ont).

[19] In the applicant's closing submissions, the applicant suggested that this court ought to consider the rulings made by two other judges as they relate to the respondent's credibility.

[20] The first ruling is that of Gilmore, J dated 10 November 2015. This ruling related to a motion in connection with a construction lien action which involved Mary and Arthur. Mary was the moving party and the respondents were Arthur and a builder, who subsequent to separation of the parties, filed a lien against "Green Valley". The motion brought by Mary was to compel Arthur to answer refusals at his examination in the construction lien action (the determination of the validity of the lien is not an issue for this court in these proceedings). Her Honour's rulings were based upon a written record and the transcript of cross-examination.

[21] The second ruling the applicant asked the court to consider is that of Jarvis, J released 15 January 2016 following a motion by the applicant as against the respondent for interim disbursements and spousal support.

[22] Specifically, applicant's counsel, asked the court to consider the comments found at paragraph 21 of the ruling on motion. They read as follows:

Individually, these and other explanations by the husband could conceivably support his plea of relative impecuniosity in the face of the wife's claims but, cumulatively, they lead to no other reasonable inference that the husband does earn, and has access to, a cash flow significantly greater than what he is prepared to admit. How much greater cannot be realistically ascertained at this point. That he is engaged in a multi-pronged strategy to compromise the wife's ability to pursue her claims and marginalize her relationship with the children seems fairly obvious too. He has indicated his intention to move for an Order selling the residence in which the wife is living.

[23] I am not persuaded by this submission. I have had the benefit of examination-in-chief and cross-examination of the parties and several other witnesses. My colleagues did not. In considering the factors relating to the assessment of credibility (as previously noted), I note that there is no jurisprudence which requires the judge to adopt credibility rulings or obiter made on motions.

Witnesses and Their Credibility

[24] The witnesses called on behalf of the applicant were Mary Alajajian and Dan Colburn. The applicant also called as an expert Paul Mandel, and in reply evidence called Arthur Alajajian, Leda Yazejian, and Tahir Saeed.

[25] The witnesses called by the respondent were Arthur Alajajian, Robert Shore, Ivan Rapa and his expert Ms. Paula White.

Review of the Evidence of the Witnesses Testifying on Behalf of the Applicant

Mary Alajajian "Mary"

[26] Mary's evidence reveals that she had little involvement in the financial affairs of the parties. She described her role as looking after all of the household and parental tasks. Mary testified that Arthur controlled all of the finances and that she had no access to any funds. She acknowledged having a bank account into which she would deposit cash given to her by Arthur. In turn, she would write cheques to pay the household bills from this account. Mary acknowledged having four credit cards, all with small limits. Mary indicated that she could only use the credit cards with Arthur's approval.

[27] Mary's evidence in-chief was that she owned no real estate, that the parties went on two or three trips per year, luxurious shopping sprees, dined at high end restaurants, and drove many luxury automobiles.

[28] Mary described Arthur's company ("Ital-Can") as a viable business operation. She indicated that she only attended at the business location a few times since its inception. This was due to her assertion that Arthur had directed her not to attend.

[29] Mary described two incidents in which Arthur allegedly assaulted her. The first was what could be described as an assault following Arthur's jealous rage. The second depicts a violent assault where Mary was choked and rendered unconscious.

[30] Mary described the events leading up to Arthur's arrest and extradition to the United States in 2000 on charges of conspiracy to traffic in controlled substances. Mary testified that during this period (which included Arthur's incarceration for approximately one year) that things got financially better for the family. That Ital-Can was doing well despite Arthur's incarceration and that there was no change in lifestyle. Mary acknowledges that Arthur's father "Armanac" was giving her approximately $10,000 cash per month cash for spending money and household bills.

[31] Mary described the year preceding the June 2015 separation as being awful. She had told Arthur she wanted a divorce. She testified that Arthur's response was, "I wish you would die" and threatened that it would be "easier to kill you than get a divorce".

Mary testified that Arthur had installed hidden surveillance cameras inside the house. She believed that Arthur monitored her every movement and that Arthur had, in fact, attached a device to her telephone from which he could control the phone and listen to her conversations.

[32] Mary describes in details the events of June 14th, 2015 that led up to separation. Mary states that prior to that date she had assembled almost all of the jewellery contained in a closet safe in a duffle bag inside the property at 331 Binns.

[33] She was intending to remove the jewellery, which included that owned by the children. Mary was discovered by one of the children while she was in the process of assembling the jewellery. Mary testified that she and a friend took the jewellery to Bradford and placed the items in a safety deposit box which was jointly held in her name and that of her friend.

[34] Mary returned home and an argument ensued and she left the home because she thought Arthur would kill her. She placed her phone in the family mailbox because she believed Arthur has her phone under control.

[35] The police attended and Mary was driven to a friend's home. Mary never returned to the matrimonial home after June 14th, 2015.

[36] Mary gave extensive evidence as it related to 32 Green Valley Circle ("Green Valley"). This property was owned jointly by Mary and Arthur on the date of separation. The lot was purchased earlier and the couple acted as their own contractors in the construction of what Mary described as "their dream home". Mary described her dealings with Kings Haven, the construction company hired to repair and complete Green Valley. Kings Haven had been hired because the initial contractors work was deplorable. Mary indicated that Arthur would give her cash and that she in turn delivered the cash to workers on the site, including "Tony" and "Ivan". Mary testified in-chief that she would attend weekly or sometimes bi-weekly and usually delivered $2,000 cash. Sometimes the amount may be $5,000 or $10,000. This was over the timeframe spanning 2011 to 2014.

[37] Mary acknowledged signing many legal documents and declarations relating to Green Valley. She stated she did not read them and that she signed them because she was pressured to do so by both Arthur and the children. Mary testified that at least two of the documents were signed at the lawyer's office. She signed them without discussing the contents and left them with the lawyer.

[38] During her cross-examination, Mary struggled with many relatively simple issues. She would not accept the fact that the deposit placed to acquire 40 Heath was made prior to meeting Arthur. She did, however, testify that Arthur lived at 40 Heath prior to her marrying Arthur.

[39] Mary maintained that the family did not struggle financially following marriage while residing at Heath. She maintained this position even though Arthur filed for bankruptcy and 40 Heath was lost.

[40] In cross-examination, Mary asserted that 331 Binns was not purchased by Arthur and his mother. This, despite the fact, that by trial her counsel had assembled a document brief relating to the PIN numbers of several properties, including 331 Binns. That documentation clearly indicated that Binns was purchased by Arthur and his mother. Further, with respect to Binns, Mary denied that Arthur's father Arm discharged the mortgage on Binns. Again, this was after she had the benefit (prior to trial) of reviewing the chain of title and the PIN page relating to the property.

[41] During cross-examination, it became clear that Mary had significantly overstated the family life style. She acknowledged that, in fact, the family did not go to fancy or high end restaurants and that in the years leading up to separation, the parties went out less than once per week, and when they did it would be to restaurants comparable to the Keg.

[42] It also became clear that Mary had over stated the frequency of family vacations. She acknowledged in cross-examination that most trips were to the Caribbean. That there was one trip to Europe. After 2000, Mary took the girls to Universal Studio three times. Arthur and her son did not go.

[43] Mary was cross-examined on her version of the events that led up to separation on June 14th, 2015. She initially maintained that Arthur called the police with respect to the jewellery she removed from the family home. On cross-examination, she admitted that, in fact, it was her friend that lived across the street who called the police.

[44] Mary was asked whether or not she told the police that Arthur had said "it's cheaper to kill you than hire a lawyer". She could not recall telling the police this. The officer's notes on this event are silent as to Mary making such a statement. With respect to the violent attack that Mary described at the hands of Arthur, she acknowledged that Arthur made the 911 call. Further, Mary said she sought out medical attention, received six stitches, and in due course had her stitches removed. No medical charts were produced to confirm this evidence, neither were any police notes.

[45] Mary's evidence was that when the police attended following Arthur's 911 call that she lied to the police and described the fall as accidental. Again, no police notes were tendered to reflect even this version of the events.

[46] Mary maintained the position that the liens registered against Binns and Green Valley were fraudulent and arise as a result of the conspiracy between Arthur and the claimants. In-chief, Mary had testified that she delivered cash to the workers at Kings Haven at least every other week in the sum of $2,000. Occasionally, the payments were $5,000 or $10,000 and that this occurred over a three year time span.

In cross-examination, it was suggested to Mary that taking her evidence at its best, the amount she claims to have taken to the site could in no way be enough to satisfy the contract price for construction. However, Mary continued to maintain that she did satisfy the cost. The court notes that the numbers do not support this evidence.

[47] Mary claims that Arthur and TNZ are in conspiracy with respect to the lien filed on Binns. This claim is difficult to understand. In cross-examination, Mary acknowledged that she did not pay for any of the renovation work on Binns and she does not know if Arthur paid anything. Mary does acknowledge that the work was, in fact, done. She testified that she was pleased with the work.

Dan Colburn

[48] The applicant called this private investigator to provide evidence on the following:

1. Arthur owned automobiles which were not declared in his financial statements;
2. Ital-Can and AAA Diamonds were ostensibly the same corporation; and
3. Ital-Can had considerable inventory with substantial value.

[49] Counsel for the applicant tendered Mr. Colburn's evidence to support the applicant's allegation that Ital-Can was a vibrant going concern with considerable inventory, and that contrary to Arthur's evidence the business was not wound down due to a dwindling economy but rather was an intentional act to deplete the value by Arthur. Applicant's counsel submitted that Arthur diverted profit and product and that it was Arthur's intention to deplete the value of the business.

[50] The evidence adduced during cross-examination of Mr. Colburn, however, does not support the applicant's theory.

[51] Mr. Colburn testified that despite having Arthur under surveillance for five days Arthur was never observed to be present at either businesses location.

[52] Further, Mr. Colburn testified that he never saw anything in the business premises that had the Ital-Can logo on it. Mr. Colburn acknowledged that the jewellery he observed in the display cases at the business premises could have been zirconium and not, in fact, diamonds.

[53] The court was troubled with the fact that Mr. Colburn attended court ready to provide evidence but failed to produce copies of his letter of engagement or his entire file inclusive of pictures. One would have thought a private investigator and business owner of 25 years, who had been recognized as an expert in trials before, would not have made such an error, particularly when the pictures would have confirmed his evidence. Taken as a whole, Mr. Colburn failed to provide sufficient evidence to support the theory of the applicant's case as herein before set out in points one through three.

Arthur Alajajian "Arthur"

[54] Arthur described his family history following their relocation from the Soviet Union to Canada. Arthur finished high school, attended Centennial College for a year, and then another year at Seneca College. Arthur never completed college and instead he started a jewellery repair shop in Toronto.

[55] Arthur met Mary when he was in his mid-20s and she was in her early 20s. They became engaged shortly after their first date. Prior to their wedding, Arthur owned a home on Heath Street in Richmond Hill. The down payment was a gift from Arthur's father, Armanac ("Arm"). Arthur lived in this house for about a year prior to marriage.

[56] Several of Arthur's businesses failed and ultimately he filed for bankruptcy. The Heath property was lost as a result of this.

[57] Arthur incorporated Ital-Can in 1994, around the same time that 331 Binns was purchased. Binns was a pre-construction project. Arthur's mother provided the financial assistance in order to acquire the property. Title to 331 Binns was originally held in the name of Arthur and his mother. Arthur testified that this was due to his previous bankruptcy.

[58] Arthur's testimony in-chief and during cross-examination was easy to follow. He answered questions directly. He was not evasive and his testimony was corroborated by other witnesses and documentation.

[59] The court was impressed with the clarity of his evidence during his three days of cross- examination. He contradicted himself very rarely, and when he did, it was on minor details.

[60] Arthur was very clear in explaining the series of purchases made by Ital-Can before and immediately following the date of separation. He explained the process of acquiring U.S. funds and the resulting reallocation for payments to suppliers.

[61] Arthur's evidence on the circumstances surrounding "Leda's" discharge from Ital-Can and Leda's continued receipt of weekly pay was not an attempt to divert funds (as was submitted by applicant's counsel). It was weekly payments of salary in lieu of notice following her dismissal. Leda confirmed this fact during her questioning.

[62] Arthur acknowledged directing the household bills to his corporate office. The court accepts the fact that this was not an attempt to withhold financial information from Mary but rather to ensure that household bills were being paid in a timely fashion. Mary struggled with staying on this task and Arthur did not wish to face further threats of disconnection of services as a result of non-payment.

[63] Arthur's description of the family lifestyle was also corroborated by the evidence tendered, including admissions made by Mary in cross-examination. This family had a decent lifestyle but it was not anything near the luxurious lifestyle of the rich and famous as Mary deposed to time and time again. There is, however, an exception to this, and that would be the makes and models of the family automobiles. It is noted that all vehicles were purchased used, and some for investment or resale. The court also accepts that both and Mary had a passion for the cars they acquired.

[64] I accept Arthur's evidence as it relates to why Greenvalley was purchased. Mary described this as the acquisition of the couples "dream home". Arthur, on the other hand, testified that this property was purchased effectively as an investment. The plan was that 331 Binns would be sold, and the funds reinvested into Greenvalley. The parties would take up residency in Greenvalley to take advantage of tax laws, sell Greenvalley and hopefully buy a modest home without a mortgage. The building and sale of Greenvalley was to be a means to this end.

[65] Greenvalley turned out to be the family's worst financial nightmare. The family simply lacked the means to generate sufficient funds to maintain 331 Binns and complete construction on Greenvalley. As a result, the contract with "Kings Haven" was negotiated to see to the completion of the project and payment to Kings Haven for the construction work they did. Kings Haven was to be paid upon sale of Greenvalley.

[66] When Kings Haven learned of the marriage problems Arthur and Mary were experiencing, they filed a lien against Greenvalley to protect their investment. The orders of non-depletion, lump sum payments to Mary and the quantum of interim temporary spousal support ordered all created a perfect storm for financial ruin.

[67] I accept Arthur's evidence that in order to comply with these orders he was forced to drain Ital-Can of all available financial resources. I do not find that the depletion of Ital-Can's resources (which included the sale and/or mortgage of condominiums owned by the corporation) was done to divert funds. Rather, these funds were used to keep the company viable and ultimately to satisfy the financial obligations that Arthur faced by way of court orders.

[68] Despite taking these drastic steps, Arthur was unable to comply with the orders. There simply was not enough money to make it happen.

[69] There are some aspects of Arthur's evidence that are troubling. His assertion that he is not to be painted in a bad light with respect to the children's law suit against Mary is difficult to accept. On the one had Arthur testified that he wants Mary and the children to have a meaningful relationship, while on the other hand he is, in fact, the litigation guardian for the couples' youngest child in the action against Mary.

Robert Shore

Mr. Shore's evidence was of little assistance.

Ivan Rappa

[70] Mr. Rappa was one of the principals in Kings Haven, the company that undertook renovation and construction work of Greenvalley after the termination of the initial contractor.

[71] The Kings Haven contract with Arthur and Mary contained a provision for payment upon completion.

[72] The lien Kings Haven registered against Greenvalley only came after Mr. Rappa was made aware of the marriage difficulties the Alajajian's were facing. The lien was registered to protect Kings Haven interest in Greenvalley. Mr. Rappa's evidence was strong and persuasive. It also corroborated Arthur's evidence on the history relating to Greenvalley and Kings Haven involvement.

Applicant's Reply Evidence

[73] The court permitted applicant's counsel to recall Arthur in order to avoid any potential breaches of the rule in Brown v. Dunn. This was permitted because the applicant wished to call witnesses Leda Yazejian and Tahir Saeed in reply, in an attempt to challenge Arthur's credibility. The court permitted this unusual request despite the fact that applicant's counsel had cross-examined Arthur previously for three full days.

[74] The applicant's theory was that Arthur was diverting funds to his friend, employee, and girlfriend "Leda" and to her company DiORO. In addition, the applicant called in reply Mr. Saeed, the accountant who acted for Arthur, Armanac, AAA and DiORO to support this theory.

[75] Neither of these strategies were successful. Leda confirmed that her income received post-termination was, in fact, payments in lieu of notice.

[76] Leda testified that she opened her own company following her termination from Ital-Can. Her company, DiORO sold gold and jewellery which was, of course, Leda's experience for over 20 years. It was of little surprise that this was the area that she chose to work in.

[77] Leda confirmed Arthur's evidence that although Ital-Can and DiORO did business post-separation, it was only on two occasions. Arthur held no corporate or business interest in DiORO.

[78] Leda testified that earlier in 2015, Arthur's "head was no longer in the business". She noted that during this timeframe that Arthur appeared upset and exhausted. She attributed this to the "family issues" that Arthur was dealing with.

T Saeed

[79] The applicant called Mr. Saeed as part of his reply case. Mr. Saeed testified that documents he received prior to Armanac's death were prepared absent any instructions from Arthur. The source documents provided to Mr. Saeed as they related to AAA came from AAA staff and not Arthur.

[80] Mr. Saeed testified that he never received any instructions from Arthur with respect to Leda, DiORO and AAA (the latter, at least, until after Arm's death which occurred during the hearing of this trial)

The Experts:

Paul Mandel

[81] The Applicant called Mr. Paul Mandel of Collins Barrow as an expert. Mr. Mandel acknowledged that he provided no expert evidence as it related to business valuation or income valuation.

[82] Mr. Mandel's evidence was led on the issue of financial forensics, and specifically to support the applicant's theory that there were "substantial amounts of unreported income". Mr. Mandel tested the reasonableness of this theory by utilizing three methods:

1. Benchmark;
2. Lifestyle;
3. Extraordinary construction expenses i.e.) Greenvalley.

[83] Mr. Mandel's report was prefaced on the basis of "substantial allegations of unreported income in connection with Arthur".

[84] It appeared to this court that Mr. Mandel's evidence was not focused on the reasonableness of the unreported income admitted by Arthur, but rather to provide expert evidence to support the "substantial allegation of unreported income". The opinion evidence proffered by this witness left the court with the impression that, in fact, the witness was not independent or unbiased, but rather had been hired to support the applicant's theory.

[85] This became abundantly clear when Mr. Mandel explained the three tools he used to test "reasonableness" ie) 1. benchmark, 2. lifestyle, 3. extraordinary construction costs.

[86] Mr. Mandel testified that his source for the information was Mary and the documentation provided through the disclosure process. The report highlighted the fact that not all of the disclosure requested was provided. Counsel suggested that this should leave the court with an adverse inference on these issues. During cross-examination however, Mr. Mandel acknowledged that, in fact, he had received much of the disclosure that he had reported as missing. Further, this court is satisfied that other relevant disclosure was provided to applicant's counsel, but for whatever reason was not turned over to Mr. Mandel.

[87] The first tool used by Mr. Mandel was "benchmarks". His evidence on this point was unconvincing. The "benchmarks" were not specific to the wholesale of gold and diamonds and was speculative in nature.

[88] The second tool was that of "lifestyle". The suggestion made by Mr. Mandel was that if spending exceeded available income then one could find that there was unreported income. Mr. Mandel relied upon two newspaper articles from sources unknown and untested to support his opinion that there was substantial unreported income. The articles carried little weight. In addition, Mr. Mandel testified that he did not account for gifts from the family, the draw down of the shareholders loans, increase in personal debt, or the use of Mary's inheritance.

[89] The third tool used related to "extraordinary construction expenses relating to Greenvalley". This expert submitted that the extraordinary expenses for "Greenvalley" must have been from undisclosed cash income. The basis for this hypothesis was weak. Mr. Mandel never examined the construction contracts, never spoke to Arthur, and relied upon the presumption that the lien registered by Kings Haven was somehow relevant to the monies expended as it related to the first contractor and the validity of the lien itself. This evidence was of little assistance.

[90] Taken as a whole, Mr. Mandel's "expert" report is of little value. The report was neither independent nor persuasive.

Paula White

[91] Paula White, the owner of Paula White Valuations Inc., was retained by the respondent to provide an expert report as to the value of Ital-Can as of June 14th, 2015 and Arthur's income for the years 2012 to 2016.

[92] Ms. White's evidence was frank, direct, and in the court's view, unbiased. Her valuation report was delivered to the respondent's counsel in December of 2015.

[93] No critique of the "White report" was ever done by the applicant. The applicant offered no expert evidence on the issue of corporate value or Arthur's income for support purposes (it being noted that the decision of Jarvis, J dated 15 January 2016 on the motion for interim disbursements found that such a payment was warranted, in part, to retain an expert on these issues).

[94] Ms. White testified that she chose to use the corporate assets and liabilities as the basis for arriving at a value of $648,000. This amount was primarily attributed to the value of condominiums owned by the corporation. The condominiums were similar. One was sold just prior to the date of separation and the transaction closed post-separation. The sale price of that condominium was used to determine the value of the two other condominiums that continued to be owned by Ital-Can.

[95] Ms. White also testified that another method of valuation for the company would be to treat it as a "going concern". Using this method would require a review of the corporate earnings in order to determine whether the corporation had any "good will". Ms. White explained that she did not use the earnings method as the corporation had not generated sufficient profit over several years preceding the date of separation.

[96] Ms. White reviewed the unaudited corporate financial statements, tax returns and general ledger of Ital-Can. Additional documents were obtained from Ital-Can which included a review of the respondent's personal income tax returns and credit cards. Ms. White was informed of undisclosed cash income of approximately $8,000 per year. This amount was generated as it related to gold shavings that were collected, stored and sold.

[97] Ms. White opined that the unreported cash income would have had little effect on the valuation of the business as it would not be a relevant factor for a purchaser looking to purchase for value.

[98] The White valuation took into account notional taxes on the sale of the corporation and a debt owing to the shareholder (Arthur).

[99] Applicant's counsel raised issues with respect to the White report, specifically their submission is that the value contained in the White report ($648,000) should be varied taking into account the following:

1. The value of condo Unit 4201 ($585,000);
2. Income tax arising by virtue of a notional sale of the corporation;
3. A promissory note of $241,000; and
4. Bad debts of $191,000.

[100] Each of these issues will be dealt with separately.

Analysis of the Evidence on Issues Relating to Equalization

[101] Prior to the commencement of trial, and utilizing Exhibit 44 (Comparison of Differences in Net Family Property Statement), the parties were able to narrow the issues relating to equalization. There was little disagreement on the value attributed to each parties' assets. The central issues relating to a determination of NFP's were the following:

1. The value of Ital-Can Incorporated;
2. Ownership of 331 Binns;
3. The gift of 1001 Bay Street;
4. Date of marriage assets and liabilities;
5. The "gifting" of a Porsche and Corvette to two of the parties' children;
6. The amount to be excluded from the applicant's NFP as it relates to "gifted" jewellery; and
7. The amount to be deducted from the applicant's NFP as it relates to funds she inherited.

[102] Applicant's counsel cross-examined Ms. White on the four items previously noted in connection with Ms. White's evidence of value of Ital-Can.

The Value of Condo Unit 4201

1. This was one of the three condominiums owned by the corporation. This condo was sold prior to the date of separation but the transaction closed approximately one month later. The applicant submits that Ms. White's treatment of Unit 4201 is flawed and that she failed to include the value of this unit into her valuation report.

2. I do not agree. In note 1 of Schedule I of the White report, Ms. White explains exactly how the value of Unit 4201 is included.

3. Ms. White was cross-examined on this point. She advised at the time of her review she had Ital-Can's general ledgers for the period preceding 2015. She did not attempt to create a financial statement for the company from the general ledgers. She testified that this was not her role as an expert. Instead, Ms. White assumed that there were no peaks or valleys during the 2015 calendar year. I accept Ms. White's evidence on this point and find that the value of Unit 4201 was, in fact, considered in her valuation report.

Contingent Income Tax on Ital-Can

1. The applicant submits that the value of Ital-Can ought not to be reduced by the contingent tax liability identified in the White report.

2. The applicant submits that the respondent has the onus of leading evidence on the likelihood and timing of a sale in determining whether or not there would be an entitlement to the reduction in value as it relates to contingent taxes. The applicant offered no direct evidence or opinion on this point.

3. The court must consider whether there is evidence of likelihood and timing of a sale in order to permit the contingent tax liability.

4. A preservation order was made by Justice Bennett on 21 August 2015. The order prohibited the respondent and Ital-Can from disposing of assets except in the usual course of business.

5. The preservation order was never reviewed, despite the fact that the ruling of Jarvis, J delivered 15 January 2016 specifically contemplated a review. At paragraph 5, His Honour stated:

Both counsel have agreed that questioning is needed and that, given the complexity of the issues and the wife's wish to commission a critique of the Reports of the husband's valuation expert, a long motion will be required to properly deal with the support issue and current restraint on the husband's business activities pending trial.

(A long motion on this issue never occurred).

6. I am satisfied that the respondent took drastic steps to attempt to comply with the Jarvis order. The key portions of that order are found at paragraph 24:

(1) The husband shall pay to the wife on or before January 29, 2016 the sum of $80,000 as an advance on her equalization payment;

(2) The husband shall pay to the wife monthly spousal support in the amount of $12,000 effective December 1, 2015 and monthly thereafter on the first day of each and every succeeding month until further Order of this court;

(3) Save and except for the mortgage and realty taxes on the residence in which the wife lives, which expenses shall be paid by the husband, the wife shall assume responsibility for the operating costs of her residence effective February 1, 2016; ....

7. Arthur testified at length as to how poor the business was doing in the year leading up to separation. Some of the steps he took prior to separation were:

   a) sale of one of the condominiums; b) mortgaging of two of the condominiums; c) drawing down on shareholders loan.

8. The combination of the payments ordered by Justice Jarvis and the preservation order made by Justice Bennett left the respondent in a very difficult position. (The respondent was forced to take drastic steps, something which the respondent openly acknowledges he did earlier in the history of this marriage). Steps taken post-separation included melting down and selling personal jewellery; depleting his shareholder loan; defaulting on payments to suppliers; discontinuing the acquisition of inventory; selling existing inventory at much reduced prices.

9. What troubles the court is why the respondent did not take steps to have the preservation order reviewed. I am satisfied that the respondent has not met his onus of demonstrating the timing and likelihood of sale. In fact, most of the evidence on this point leads the court to conclude that it was never Arthur's intention to dispose of Ital-Can. Rather, he wished to do everything he could to save it.

10. Accordingly, the contingent tax liability of $163,000 will be added back to the value Ms. White attributes to the company.

Ital-Can's Promissory Note Payable to AAA

1. This note was partial consideration given by Ital-Can in connection with the purchase of Condo 4301 from AAA. The purchase price for this condo was $379,900. It was paid as follows:

   i) $138,941.06 by corporate cheque; and ii) a promissory note in favour of AAA in the amount of $241,000.

2. Both corporations properly documented this transaction in their financial statements for 2013.

3. The applicant questions the date of the promissory note and challenges the notes validity. The note is dated November 22nd, 2013. The closing date of the sale of 4301 was June 21st, 2013.

4. On November 22nd, 2013, closing documents relating to the transfer of 1001 Bay Street were also executed. This was the transfer of a property owned by Arthur's father ("Armanac") to Arthur.

5. The applicant submits that there have been suspicious financial dealings between Arthur and Armanac and that the two corporations, Ital-Can and AAA. The applicant submits that there is "no reason to believe that the debt had not been satisfied at some time prior or that it was not part of some other transaction". The applicant led no evidence on this point, nor did the applicant cross-examine the respondent on the issue of the notes validity.

6. I accept the respondent's submissions on this point. This debt was taken into account by Ms. White in the valuation of Ital-Can, insomuch as the value of Ital-Can was reduced by the value of the promissory note. Any purchaser of the corporation Ital-Can would have been bound by the corporate liability owing to AAA.

7. It is not appropriate for the court to rely on post-separation events to determine the foreseeability of the demand. On this point, the court finds that the debt existed and remained outstanding at the date of separation and that the debt was properly accounted for in the valuation of Ital-Can.

Ital-Can's Bad Debts

1. A bad debt adjustment is found in the 2015 income statement for Ital-Can. The debt is stated at $211,942 and is challenged by the applicant.

2. The bad debt would reduce the accounts receivable of the corporation and therefore the value of the corporation as of date of separation.

3. Counsel for the applicant relies upon the endorsement of Jarvis, J, and in particular, His Honour's comments found at paragraph 14(h):

The business valuation commissioned by the husband was a Calculation Valuation report, the lowest level of assurance, and based on information provided by the husband. An unexplained capture of bad debt almost 50 times greater than the previous year resulted in an operating loss over four times greater than the previous fiscal year end. Neither this valuation, nor the income analysis, made any effort to address the wife's allegations about the substantial, unrecorded cash resources available to the husband. All the husband was prepared to admit to his valuator was an unrecorded cash income between $5,000 to $7,000.

4. Justice Jarvis did not have the benefit of Ms. White's evidence in-chief and on cross-examination, nor did His Honour have the benefit of the evidence of the corporate accountant, Mr. Saeed. Further, His Honour did not have the benefit of evidence adduced at trial that dealt with the allegations of "substantial, unrecorded cash resources" available to Arthur.

5. After reviewing all of the evidence on this point, I am of the view that the bad debt is properly accounted for in Ms. White's valuation. In coming to this finding, I also rely upon the evidence of Mr. Saeed.

The Ownership of 331 Binns

[103] 331 Binns was the matrimonial home. Binns was purchased in 1993. Arthur's mother provided the down payment and title was in Arthur and his mother's name. On February 25th, 1994, a transfer from Arthur and his mother's name to Arthur's name alone occurred followed immediately by a transfer from Arthur to Mary's name alone.

[104] Arthur's evidence was that the transfer was done in order to protect the asset from creditors. Arthur had previously been a discharged bankrupt and had lost a home he owned prior to marriage and referred to as "Heath". Arthur was starting a new business and wanted to ensure that creditors could not seize this asset. There was no evidence tendered by either Mary or Arthur suggesting that this property was to be a gift over to Mary.

[105] The evidence is clear that Mary never worked over the course of the marriage or worked very little and all of the day-to-day expenses were, in fact, paid by Arthur.

[106] The Binns property was sold in the summer of 2017 pursuant to power of sale proceedings. Net proceeds remaining from the sale amount of approximately $790,000. The entire amount is not available to the parties as there is an outstanding action relating to a line of credit and a lien action wherein the amount claimed is approximately $115,000.

[107] Section 14 of the Family Law Act sets out a presumption of resulting trust. Where the presumption applies, a finding of beneficial ownership in the context of a gratuitous property transfer is to be made. The party resisting the imposition of the resulting trust has the onus of disproving the presumption.

[108] If the party is unable to disprove the presumption, then the spouse will be held to be the beneficial owner of a one-half interest in the property and entitled to share in any post-separation increase in the property's value. Effectively, the spouse will be placed in the same position as a joint owner (see: Gorman v. Gorman, 2015 CarswellOnt 12612 (ONCA))

[109] On the evidence before the court, the Applicant has failed to disprove the presumption of resulting trust as set out in s. 14 of the Family Law Act.

[110] The court finds that Arthur is entitled to one-half of the net proceeds of 331 as of the date of sale and subject to the other existing claims against those proceeds by third parties.

The Gift of 1001 Bay Street

[111] 1001 Bay was the residence of Armanac for the last 30 years of his life. It was transferred to Arthur in November of 2013. Arthur submits that the property was a gift to him from his father so that funds would be available to Arthur to assist in Armanac's health care costs. Arthur contributed no money to the acquisition or upkeep of this property.

[112] Mary submits that the presumption of resulting trust should apply in favour of Armanac. I agree.

[113] Arthur's explanation as to how the transfer came about actually supports the presumption and accordingly, I find this asset continues to be an asset of the Estate of Armanac.

Date of Marriage Assets and Liabilities

[114] The only asset identified or disputed to be date of marriage assets is 40 Heath Street. This was a property owned by Arthur prior to marriage and was not otherwise the matrimonial home. The agreed upon value of that property is $353,900. When the court takes into account the mortgage and notional disposition costs, the net value of property owned on date of marriage as it relates to Heath is $64,790, and I agree with this calculation. Accordingly, this adjustment needs to be reflected in the calculation of Arthur's NFP.

2007 Porsche and 1964 Corvette

[115] The parties agree that the combined value of these two automobiles was $110,000. They were transferred to the children three to six months prior to separation, and at a time where according to both parties' evidence they were experiencing significant marital problems. The children paid no consideration for them.

[116] Arthur indicates that the vehicles were gifted and that Mary knew about it. Arthur submits that there was an argument between he and Mary about the vehicles being transferred.

[117] Mary's evidence was that she had no idea that the vehicles were gifted, and that the vehicles should be treated as Arthur's assets, again applying the concept of resulting trust.

[118] It is difficult to accept Arthur's submission on this point. In the midst of marital discord, he transferred two assets of considerable value. I find that not only was this an unreasonable step but it was a power play move. I am of the view that the vehicles' value should be attributed as an asset on Arthur's net family property.

Mary's Jewellery "Gifted"

[119] Section 4(3) of the Family Law Act places an onus of proof upon the person claiming a deduction or exclusion from their NFP.

[120] Mary claims an exclusion of jewellery. She submits that it was gifted to her. However, she provides no value of jewellery at the time of separation, nor does she provide a value of the jewellery which she submits was gifted to her and should be excluded.

[121] Mary was cross-examined with respect to the jewellery, and although she provided a detailed summary of the pieces of jewellery (including photographs), she only identified two pieces of jewellery which she indicated were given to her by her father-in-law and had significant value.

[122] The evidence was that the balance of the jewellery came from Arthur. The only item eligible for exclusion is the gift of Armanac of the diamond necklace and bracelet.

[123] Mary never obtained an appraisal of the jewellery but in cross indicated that she would not accept $75,000 for all of her jewellery and would consider accepting $100,000.

[124] Counsel for the Applicant indicated in his submissions that it was not necessary to provide these values and submitted that he was not required to provide these values. No jurisprudence was referred to that supports this position, and accordingly, based upon the meager evidence I have on this point, I find a value of $75,000 for the jewellery to which an exclusion in the sum of $10,000 relating to the diamond necklace and bracelet is applicable.

Mary's Inheritance

[125] Mary received two inheritances from her parents on their death. The parties agreed in Exhibit #44 that the inheritance was valued at $293,220. Mary seeks to exclude the inheritance and submits that it should be traced into Greenvalley.

[126] Arthur disputes this.

[127] The funds were, upon receipt, deposited into the parties' joint back account. Mary provided no evidence to assist the court in tracing what portion of the inheritance went into Greenvalley (an asset existing at the date of separation). On date of separation, the joint back account into which the funds were deposited had a balance of approximately $11,600. Arthur testified that this account was used to pay day-to-day living expenses and may also have been the source for contributions to Greenvalley's expenses. I have taken into account the fact that the inheritances was deposited into the parties' joint account, and as noted, was a relevant factor in dismissing Paul Mandel's report. Given the limited evidence on this point, and the fact that the funds went into a joint back account, and were used to fund work on Greenvalley (not a matrimonial home), I find that Mary is entitled to one-half of the deduction of the entire inheritance which totals $146,611 (see: Colletta v. Colletta, 1993 CarswellOnt 3356 (ONCA).

Equalization

[128] As a result of these findings, and in light of the acknowledgements as set out in Exhibit #44, an equalization payment is owed to Mary as set out in Schedule A.

Arthur's Income for Support Purposes

[129] With respect to Arthur's income for the years 2015 and 2016, I accept the evidence of Paula White and find that Arthur's income for those years is as follows:

a) For 2015, $189,000; and b) For 2016, $157,000.

[130] Section 19(1) (a) of the Child Support Guidelines permits the court to impute income for support purposes where the court finds that a spouse is intentionally underemployed or unemployed.

[131] The court is to consider three questions:

a) Is the spouse intentionally underemployed or unemployed?; b) If so, is the intentional underemployment or unemployment required by virtue of reasonable educational needs?; and c) If not, then what income is appropriately imputed in the circumstances.

(See: Dryagala v. Pauli, 2002 ONCA 41868, 2002 CarswellOnt 3228 (ONCA)).

[132] The applicant has failed to demonstrate that Arthur had substantial "unreported income" and as a result the court must be satisfied that there are otherwise appropriate circumstances for imputing income.

[133] Arthur testified that he accepted a job at Midas (a gold dealer) at the same time he appointed his son as principal officer and director of AAA Diamonds. Arthur was operating AAA Diamonds under a Power of Attorney previously executed in favour of him by his father, Arm. This all occurred post-separation.

[134] Arthur appointed his son as the principal officer and director of AAA because he was tired of "running a business". The court cannot overlook the fact that in so doing he appointed his son to a position which paid more than Arthur was earning at Midas. This was an intentional and unreasonable decision given the existing financial obligations Arthur faced, and as a result, I would impute Arthur's income to $70,000 per year for the years 2017, 2018 and 2019. The latter being subject to further financial disclosure.

Mary's Income for Support Purposes

[135] Mary's evidence also demonstrates an intentional decision to remain unemployed. However, Mary has little work experience, limited education, and is clearly in a diminished emotional state. Given these factors, I would impute income to Mary in the sum of $29,000 per annum. However, that imputation of income would not take effect until the second anniversary of the parties' date of separation. In my view, by that time Mary should have overcome these obstacles and be in a position to earn at least minimum wage.

Should Mary be Paying s. 7 Expenses as They Relate to Adrianna's Post-Secondary Costs

[136] At the time Adrianna commenced her post-secondary education she was over 18 years of age. She has chosen to disconnect with her mother. Adrianna has, in fact, sued her mother. The results of that law suit were not made available to this court at the time of the trial. In these circumstances, and given the conduct of Adrianna effectively withdrawing from any parental contact, I find that Mary has no obligation to contribute to Adrianna's educational expenses.

[137] Accordingly, and as a result of these reasons, I find the parties' income for support purposes to be as follows:

YEAR	ARTHUR	MARY
2015	$189,000
2016	$157,000
2017	$ 70,000	$29,000
2018	$ 70,000	$29,000
2019	$ 70,000	$29,000

[138] Arthur shall continue paying spousal support in the sum of $1,495 based upon his income being $70,000 per annum and Mary's income imputed to $29,000 per annum (this being mid-range SSAG) payable on the first day of each month commencing September 1st, 2019. Support is payable for an indefinite period of time, subject only to a material change in circumstance. SDO to issue.

[139] Further, and in light of the significant decrease in Arthur's income post-separation, the parties shall exchange their income tax returns and notices of assessment on or before the first of September each year commencing September 2019.

[140] Any increase in Arthur's income of $10,000 or more shall be considered a material changed in circumstance.

[141] Attached and marked as Schedule B hereto is the calculation of overpayment of spousal support, taking into account the incomes as set out above, and the amounts actually paid by Arthur.

[142] On the issue of equalization, and after finding a payment owing by Arthur to Mary in the sum of $559,833.67, this court takes into account the following amounts previously paid; $80,000 – ordered 15 Jan 2016; $50,000 – ordered 18 Sept 2015; $5,000 – ordered 10 July 2015 the net amount owing on equalization is therefore $424,833.67.

[143] From this amount a further reduction of $143,705.82, representing the overpayment of spousal support must be made. As a result, the adjusted net amount owing to Mary is $281,127.85.

Costs

[144] On the issue of costs, counsel are to serve and file two page submissions with supporting offers to settle and bills of costs within 30 days hereof. Each counsel will be entitled to a further two page response to the others submissions. Same to be served and file within 45 days hereof.

J.S. McLeod

Released: August 8, 2019