COURT FILE NO.: (LONDON) F 196/15
DATE: 20191030
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Amneh Tawfic Abu-Saud
Applicant
– and –
Azam Asaad Abu-Saud
Respondent
Sharon Hassan, for the Applicant
B. Thomas Granger, for the Respondent
HEARD: November 19, 20, 21, 22 and 23, 2018
REASONS FOR JUDGMENT
CAREY J.:
Overview
[1] The parties were in a long-term marriage of 27 years and separated in February of 2015. They worked together in Mr. Abu-Saud’s business for a significant portion of that time. The issues on this trial are spousal support and equalization of net family property.
[2] A key issue in this family law trial is the valuation of the husband’s financial advising business. Each side called an expert evaluator. The husband’s expert put no value on the goodwill in the husband’s business. The wife’s expert, using a different approach, valued the business goodwill at approximately $172,500.
[3] The applicant wife seeks an order for spousal support on both a compensatory and needs basis, commencing January 1, 2019, in the amount of $2,643 per month based on an imputed income to the respondent husband of $80,000 per annum. The respondent husband suggests spousal support of $1,188 per month after equalization based on an income estimated to be $50,000 per year. He submits that if in the future the respondent’s income is higher, that the applicant can bring a variation motion based on a material change in circumstances. The wife seeks the support retroactive to the date of separation of February 2, 2015. The husband resists the application for retroactivity on the basis that the support was not requested until approximately 15 months after she instituted proceedings for divorce with no request for spousal support. If there is any retroactive support he says, it should not pre-date April 19, 2016 and should not exceed the amount of $1,500 per month stipulated in the order of Howard J. dated October 9, 2016.
[4] At the completion of this trial, late on the fifth day of a scheduled five-day trial, the parties agreed to make written submissions on a timetable to be agreed to. On December 6, 2018, the parties submitted a timetable for submissions. The parties did not agree to any restriction on the length of submissions. By March 12, 2019 written submissions had been completed. The total amount of pages of written submissions, excluding case books, was approximately 150 pages.
[5] Generally, credibility of the parties was not an issue. There were some areas of agreement such as entitlement of the applicant to spousal support and that the applicant is currently disabled from her employment. The issues to be determined in regard to spousal support are related to duration, quantum, and retroactivity, and I will deal with these in turn.
Duration of Spousal Support
[6] The parties were married 27 years before separating in February, 2015. They married in Abu Dhabi and emigrated to Canada. During the marriage, the applicant ran the family home, raised their two sons and supported her husband in the establishment of his financial consulting business. On the evidence in this trial, it is clear that the end of the marriage was devastating to Mrs. Abu-Saud. She left the matrimonial home, on her evidence, with little in the way of clothing, savings and income. She relied on her family and charity for support and was unable to work due to still unresolved medical issues that create daily challenges. While Mr. Abu-Saud remained in the family home and retained ownership of it, the family’s RRSP’s and the two family businesses, the applicant was forced to apply for and receive social assistance. Mr. Abu-Saud began paying support pursuant to an order of this court in the amount of $1,500 per month, about 20 months after the parties separated. The first payment towards a division of the family property was not to be received for almost another year. When she did receive a payment, the applicant’s testimony was that it went to paying off debt that she had accumulated since separation, and I accept this evidence as uncontradicted. I accept Mrs. Abu-Saud’s testimony as to the history between her and her husband.
[7] The couple were brought together in an arranged marriage by their Palestinian families. At that time, she was just 23 and her husband was 32. The applicant has a post-secondary degree in Business Administration and Economics from Dubai. At the time of the marriage, she was employed by the United Arab Emirates Airport. The respondent was working with United Arab Emirates Military in accounting after being educated in Iraq, at the time of the marriage in 1988.
[8] Shortly after their marriage, the respondent husband was kidnapped and jailed, but later released and deported. The couple found their way to the United Kingdom with the help of the United Nations. They applied for and were approved for emigration to Canada in 1988 with sponsorship by family. Their sons were born in 1989 and 1991.
[9] Mrs. Abu-Saud was responsible primarily for child rearing while her husband pursued courses in Income Tax Preparation and began a career in that field. In 1992, he opened the first business, General Accounting and Taxes (“G.A.T.”). Initially, the business was run out of the family home with assistance from the applicant, providing clerical support, preparing tax returns and managing the office. The business outgrew the family home and an office was rented in the same building as an investment company. Ms. Abu-Saud testified that she would attend at the office and continue to manage the office with the support of daycare, which was located across from the office, and later when the children were in school. After daycare and school, she prepared meals, did household chores and was the main parent responsible for child rearing. As well, she testified she took Accounting and Income Tax courses in the evenings to assist the growth of G.A.T.
[10] The applicant testified that she worked hard for the couple to become known in the London Arabic community and society to help building up the business. She testified that her role in the business was as office manager and she would meet clients, as well as plan monthly seminars that would be given to help members of her community learn about RSP’s and saving money. She would also be responsible for the cleaning of the office, with which the kids would help. During this time, her husband kept upgrading his courses, including studying to be a financial advisor. Their home was purchased in 1996 where she lived until their separation from her husband. She testified the family home was used for business and entertainment on a regular basis.
[11] The applicant stopped working in the family business in 2002 and worked for ten years at Jenny Craig. She testified her income from that endeavour went into supporting the family, after school teaching for the children, as well as the expenses of family therapy. During this time, there was an accumulation of family debt that she said was paid off, but she resisted going into bankruptcy, which she testified her husband had urged.
[12] The evidence was that Mr. Abu-Saud registered as a mutual fund dealer and started his second company, Superstar Investments, in 1996. The applicant said she also assisted with this business and helped build up the client base and manage the office while continuing to carry the bulk of the household and childcare responsibilities in the marriage. It was her evidence that she was responsible for setting up seminars and presentations for clients, as well as for social events designed to generate clients for the two businesses. The applicant, while she worked at Jenny Craig, it was the income she earned from there that was expected by her husband to cover the household and childcare costs, and that Mr. Abu-Saud resisted with anger her request for support of the household expenses. During this time, Mr. Abu-Saud according to his wife drew little out of the company but re‑invested it in order to build up equity in the businesses.
[13] In April of 2010, Mrs. Abu-Saud said she suffered an injury while working at Jenny Craig. It led to pain in her elbows and eventually throughout her body. She sought medical attention which included X-rays and M.R.I.’s, and by October of 2012, she had a diagnosis of fibromyalgia. She was treated for a hyperactive thyroid and was at one point put on anti‑depressants and continued with painkilling injections.
[14] She left Jenny Craig in 2012 and worked in a call centre for three months. Her health continued to deteriorate. She withdrew completely from the workforce five months after her separation from the respondent, in July 2015. In addition to the chronic fibromyalgia diagnosis, she has been, she says, diagnosed with Graves Disease and continued to have anxiety, panic attacks, fatigue, dizziness and vision difficulties, all of which require extensive medication and ongoing treatment.
Quantum and Retroactivity
[15] Mrs. Abu-Saud seeks support from Mr. Abu-Saud in the high range of the DivorceMate Guidelines based on Mr. Abu-Saud’s 2017 income for support purposes, which is set out in the expert report of Davis Martindale, dated August 9, 2018, and filed as Exhibit 17. She asked that that support be retroactive to the date of separation. The respondent does not question her current disability but argues that support should not be retroactive to the time of separation as Mrs. Abu-Saud did not initially seek spousal support. She was not integral to the success of the business, he claims, and any retroactive support should be limited to the $1,500 a month ordered on an intermittent without prejudice basis.
[16] I am satisfied on all of the evidence that Mrs. Abu-Saud took reasonable steps to pursue her legal remedies within a few months of separation. She retained a lawyer and sought financial disclosure from Mr. Abu-Saud. Mr. Abu-Saud failed to provide disclosure till forced to by the commencement of legal proceedings. I do accept that a combination of lack of financial means as she was receiving no support and her spiralling health deterioration contributed to delays in bringing her claim. I find that she is entitled to support from the date of separation, February 2, 2015. It is appropriate that Mr. Abu-Saud’s income for 2015 to 2017 be accepted for the purpose of calculation of support at the levels determined by Mr. Martindale in Exhibit 17.
[17] Support is ordered on both a compensatory and needs basis, recognizing Mrs. Abu-Saud’s role as both the primary caregiver for the children, as well as her important and pivotal contributions to Mr. Abu-Saud’s businesses. I have accepted Mrs. Abu-Saud’s evidence as to the reasons for delay in seeking spousal support as a reasonable explanation for the delay. I also find that Mr. Abu-Saud contributed to this situation with his conduct in refusing to pay support until ordered, ignoring the obligations to his spouse arising from their long relationship in what was both a marital and business relationship. I accept that Mr. Abu-Saud had effective notice early in the separation that his wife required and was seeking support. I accept that in these circumstances the Applicant has shown that support in the high range of the Guidelines is appropriate.
Equalization of Net Family Property
a) Value of Superstar Investments and Book of Business:
[18] Mrs. Abu-Saud seeks an equalization payment of $371,640.44. The parties agree that there have been advances of $93,236.54 that reduces the applicant’s net equalization request to $278,403.90. The critical issue in dispute is the valuation of Mr. Abu-Saud’s corporation, Superstar Investments, specifically on the value of his book of business. Two experienced, well-accredited and impressive witnesses differed primarily the value of the goodwill in the business. Mr. Hoare, for the respondent, said absent evidence of a special purchaser, the goodwill is valueless. Mr. Doug Martindale, for the applicant, considered it as the most valuable asset in this financial advice business and placed its value at $172,500.
[19] I accept Mr. Martindale’s conclusions. The book of business clearly has a value as demonstrated by the current arrangement Mr. Abu-Saud has entered into where he pays 35 percent of commissions earned on the investments made for his clients to a third party, (Monarch Wealth Corporation), who provides the administrative and office support for these clients. These clients continue to seek Mr. Abu‑Saud’s advice and he continues to earn money from that advice because of the goodwill built up over the two decades that he has had the business. The book of business was the product “produced” by the business that both parties contributed to, I find, during the course of the marriage.
[20] While Mr. Abu-Saud has de-registered as a mutual fund dealer, he continues to administer and manage his clients’ book of business. In his agreement with Monarch, he keeps his book of business under his control. In my view, the valuation of Superstar Investments reflected in Mr. Hoare’s “critique” suffers from assessing Superstar Investments’ value as a corporation as opposed to a business. I prefer Mr. Martindale’s “mutual fund multiplier” or “rule of thumb” valuation approach. He assumed any financial advisor dealer who wanted to add to their book of business would pay “a multiple of revenues based on the premise that their existing infrastructure will provide the capacity to add to the additional revenue with little impact on costs to provide the service”. This was consistent with the approach taken in McLean v. McLean, 2004 CarswellOnt 4234 (SC) and Clegg v. Clegg (2000), 2000 CanLII 22636 (ON SC), 9 R.F.L. (5th) 290 (Ont. Sup.Ct.), quoted at page 12 of MacLean:
Privately held businesses are entrepreneurial businesses, typically driven by the owner. While the personal goodwill, that is, the goodwill that attaches only to the owner, is of no value to the purchaser because it cannot be transferred, individual goodwill is of value. Individual goodwill consists of such things as the contacts, relationships and know-how put in place by the owner that can be replaced by another individual, given an orderly transition if the owner who is selling is not competing in the same market place at the same time. This goodwill is one of the major things a non-competition agreement is designed to protect. In many instances, particularly in a service business such as Mr. Clegg’s, a large portion of the purchase price will be for goodwill.
[21] In my view, the preamble to the Family Law Act, R.S.O. 1990, c. F.3 (“FLA”) which sets out the purposes of the Act to recognize marriage “as a form of partnership” and to provide for the “orderly and equitable settlement of the affairs of the spouses upon the breakdown of the partnership”, have been interpreted as requiring the sharing of all of the wealth of the parties accumulated during the marriage. The fact that something is not transferable does not mean that it is not property and does not have a value. I accept that while Mr. and Mrs. Abu-Saud lived together in their marriage and worked together, the business had built up excellent relationships with customers, employees fostered, and contacts were made that became part of the book of business. It has a value and Mrs. Abu-Saud is entitled to share in that value.
[22] I accept that Mr. Martindale’s evidence is based on the presumption that a potential purchaser will “step into the shoes” of the financial advisor and add it to their existing client base and supporting administration. It would also be on the assumption that Mr. Abu-Saud would agree to remain with the business for a period of time ensuring the transition of clients to the purchaser and agreeing not to compete for a period of time with the purchaser.
[23] These presumptions seem both reasonable in keeping with Mr. Abu-Saud’s current agreement with Monarch and the most favourable for Mr. Abu-Saud to realize the best return on investment for him and his wife’s many hours and years of careful cultivation of their client base. Indeed, goodwill is noted in Clegg v. Clegg, one of the major items non-competition agreements are designed to protect.
[24] For the foregoing reasons, I accept Mr. Martindale’s evaluation of Superstar Investments and his methodology for arriving at his valuation.
b) Contingent Tax Liability of Superstar Investments:
[25] The experts agreed on the approach to be taken to calculate the deduction for notional disposition costs of the corporation but were not in agreement on the timing of such notional disposition. The applicant’s expert, Mr. Martindale, surmised that Mr. Abu-Saud would want to maximize his return and minimize tax liability by taking such funds in income over a period of time, while Mr. Hoare was of the view that Mr. Abu-Saud would take the funds in a lump sum and thus incur the highest tax implications.
[26] I have no difficulty assuming that Mr. Abu-Saud, given his tax planning background, would adopt the most tax effective approach, given there was no evidence to suggest that he would not. In my view, it is simply a matter of common sense that the respondent would take the most effective tax friendly approach.
c) Method of Payment of Equalization:
[27] Pursuant to s. 9 of the FLA, given the consent of the applicant, it is appropriate in these circumstances that a portion of the equalization payment be made over time.
d) Interest on Equalization Payment:
[28] Equalization payment is a form of judgment and it is appropriate. Mr. Abu‑Saud who has benefitted from the use of the assets incurred in the equalization calculation, pay interest on that amount.
e) Security
[29] The applicant is entitled to an order securing the respondent’s support and equalization obligations against his corporation, Superstar Investments. He is the sole owner and operating mind of Superstar Investments, and it represents his primary source of income as well as the main asset in the equalization calculations.
Conclusion
[30] For the reasons that I have set out, I order that:
Commencing on January 1, 2019, and on the first day of each month thereafter, the respondent shall pay spousal support to the applicant in the amount of $2,653 per month, based on the respondent’s 2017 imputed income of $75,941, and the applicant’s income from Canada Pension Plan Disability Benefits in the amount of $12,000 per annum;
The spousal support payable should be increased annually on the anniversary date of the final order by the indexing factor for November of the previous year, and the indexing factor shall be defined as a percentage change in the Consumer Price Index for Canada for prices of all items since the same month of the previous year, as published by Statistics Canada;
The respondent shall pay to the applicant retroactive spousal support for the period from February 2015 to December 2018 in the aggregate amount of $94,305 as follows:
a) February 1, 2015 to December 31, 2015 in the amount of $29,205;
b) January 1, 2016 to December 31, 2016 in the amount of $37,740;
c) January 1, 2017 to December 31, 2017 in the amount of $13,716; and
d) January 1, 2018 to December 31, 2018 in the amount of $13,644.
The retroactive spousal support owing by the respondent to the applicant shall be payable at a minimum rate of $500 per month to be paid by the 1st day of each month, commencing April 1, 2019;
The respondent’s obligation to pay spousal support and retroactive spousal support to the applicant shall be binding and constitute a first charge on the estate of the respondent;
The respondent shall pay to the applicant a further equalization payment of $278,316.85, plus pre-judgment interest pursuant to the Courts of Justice Act, R.S.O. 1990, c. C.43, in full and final satisfaction of any equalization obligation owed by the respondent to the applicant;
One-half of the equalization payment owing by the respondent to the applicant shall be paid by April 30, 2019, and the remainder shall be paid by way of equal yearly instalments, with interest commencing January 2020 and continuing until January 2029;
The equalization payment owing by the respondent, represents the respondent’s equalization obligation of $371,640.44, reduced to $278,316.85, in consideration of the two advanced payments received by the applicant from the proceeds of the sale of the matrimonial home in August 2017, in the amount of $64,000, and in January 2018 in the amount of $29,236.54;
The respondent’s obligations to pay spousal support, retroactive spousal support and an equalization payment shall be secured against the respondent’s interest in Super star Investments, and the respondent shall forthwith notify the applicant, in writing, of any intention to dispose of his shares in Superstar Investments;
Unless the support order is withdrawn from the Office of the Director of the Family Responsibility Office, then it shall be enforced by the Director in the amounts owing and the support order shall be paid to the Director who shall pay them to the person to whom they are owed, and the order will bear post‑judgment interest at two percent.
Original signed by Justice Thomas J. Carey
Thomas J. Carey
Justice
Released: October 30, 2019
COURT FILE NO.: (LONDON) F 196/15
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Amneh Tawfic Abu-Saud
Applicant
– and –
Azam Asaad Abu-Saud
Respondent
REASONS FOR JUDGMENT
Carey J.
Released: October 30, 2019