COURT FILE NO.: D14925/16
DATE: 2019-Feb-13
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
LIN (DAVID) ZHENG
Applicant
– and –
QIAN XU
Respondent
Self-Represented
Deborah Ditchfield, for the Respondent
HEARD: February 26, 27, 28, March 1, 2, 13, 21, May 28 and December 19, 2018
THE HONOURABLE MR. JUSTICE R.J. NIGHTINGALE
[1] The applicant husband brings this application claiming an equalization payment from the wife regarding their net family property of $167,133. He also asks for occupation rent payable to him regarding the matrimonial home which was occupied by respondent wife since their separation.
[2] The respondent disputes those claims including the amount of the equalization payment. She claims an unequal division of the net family property in her favour and credit for the applicant’s share of the expenses she paid to carry the costs of the matrimonial home since separation. Her claim for spousal support was withdrawn during the trial.
Factual Background
[3] The parties married on November 11, 2011 and their final separation took place on March 23, 2015. The applicant states they cohabitated before their marriage commencing September 30, 2011 at the respondent’s house in Brantford; the respondent states cohabitation started at the beginning of September 2011.
[4] There was a period of separation of the parties between September 1, 2014 until December 20, 2014 when the applicant left the matrimonial home to live in an apartment in Cambridge. He stated that he moved there to be closer to his place of work in Guelph because of fatigue at the end of his work day he alleges he was having after his gallbladder surgery in May 2014 but also to be closer to his son while attending university there. He denies this separation was because of the parties’ marital difficulties. He said he just wanted to move to Cambridge for two months at the end of August 2014 but admitted he had signed a 1 year lease on his apartment.
[5] The respondent states that the applicant moved out of the apartment he had arranged for since early August 2014 because of their marital difficulties. She did not want him to leave and stated his moving out was intended to pressure her to sell their home in Brantford and move to Cambridge or Guelph with him.
[6] When the applicant left in mid-August, which was at the time the respondent was spending considerable time assisting her mother in treatment for her cancer, the applicant stopped depositing his salary into the parties’ joint account or contributing to their joint family expenses including those for their home which confirms the respondent’s version of their separation. His evidence that he deposited all his salary into their joint account until March 2015 accordingly is not true; his own chart he prepared in Exhibit 4 confirms that he made no deposits to their joint account from August 22 until December 19, 2014.
[7] He told her to get a lawyer. She did and picked up her Ford Fusion from him on September 16 exchanging his Cobalt vehicle which also confirms her evidence of the separation.
[8] The parties reconciled when the applicant moved home on December 20, 2014 after taking a short reconciliation holiday together. They finally separated on March 23, 2015 after he stopped contributing money into their joint account at the end of February.
[9] The respondent’s evidence on this point is more logical and reasonable whereas the applicant’s version that they were not separated at all during that time period does not make sense especially when he had stopped contributing to their joint household expenses and she attended in Cambridge to get her own vehicle back in September. Accordingly, the parties from September 1, 2011 until their final separation at the end of March 2015 actually cohabited for approximately 39 months. Pope v. Pope (1999) 1999 2278 (ON CA), 42 O.R. (3d) 514 (Ont. C.A.).
[10] To the parties’ credit, they have agreed on most of the issues between them regarding their respective property leaving only a few issues to be decided by this Court.
[11] They have agreed that their jointly held matrimonial home shall be immediately listed for sale with the net proceeds divided equally between them after deduction of real estate commission and legal fees on the sale.
[12] They have also agreed on the values for their household contents, their respective motor vehicles, bank accounts, RRSP’s (except the issue of costs of disposition) and investment accounts on the dates of marriage and separation.
[13] The parties also agreed during the trial on the values on the dates of marriage and separation of a condominium acquired by the respondent wife in 1997 in China 14 years prior to the marriage.
[14] The following are the matters to be decided in this application.
$18,393 Deposit by Applicant on Purchase of Matrimonial Home
[15] Prior to their marriage, on June 7, 2011 the parties entered into an agreement to jointly purchase their house to be constructed at 39 English Lane in Brantford. Both parties agreed to contribute $100,000 each towards the purchase price.
[16] The applicant paid the builder from his own personal bank account the sum of $18,393 by way of a series of cheques from June to September 2011 as a security deposit to be credited against the purchase price.
[17] The parties commenced cohabitation in September 2011. They married on November 11, 2011 and the purchase of their matrimonial home was completed on February 23, 2012 subject to a $150,000 3 year mortgage.
[18] The applicant’s position is that the deposit monies he paid was property owned by him on the date of marriage and was an equitable or contingent interest in the matrimonial home. Hence, he says it is to be deducted from his net family property.
[19] The respondent’s position is that the deposit created an equitable interest of the applicant in the matrimonial home. Zender v. Ball 1974 ONSC. Accordingly, as it constitutes property of him, i.e., an ownership interest in the matrimonial home and perhaps both of them jointly, he cannot deduct it from his net family property under s. 4(1) of the Family Law Act. That section defines net family property as the value of all property except excluded property that a spouse owns on the date of separation after deducting the value of property, other than a matrimonial home, that the spouse owned on the date of marriage.
[20] In my view, the applicant is not entitled to that deduction from his net family property. The deposit funds of $18,393 he paid constitute at least his having an equitable interest in the matrimonial home to the extent of the deposits made. They should not be treated any differently in calculating his net family property than if he held some legal title to the home.
[21] In addition, the deposit funds that he paid to the builder were no longer in his bank account or in his possession at the time of the marriage and were actually part of his $100,000 contribution that he made towards the purchase of the home. The respondent wife pursuant to their agreement made a similar $100,000 contribution by way of an initial cash payment from her bank accounts on closing and a further contribution when she sold her house on Foster Street that she owned on the date of marriage.
[22] The applicant’s position is simply not logical or reasonable as it would mean that the parties would and did equally contribute to the purchase of the matrimonial home but that the applicant would be entitled to an $18,393 deduction from his net family property for those deposit funds that he paid earlier as part of his $100,000 contribution.
[23] The applicant referred to the decision of D’Amico v. D’Amico, 2011 ONSC where the Court treated a deposit payment made by the husband before the date of marriage for the purchase of their matrimonial home as a credit to him on the date of marriage.
[24] However, the Ontario Court of Appeal in Michalofsky v. Michalofsky (1992), 1992 14023 (ON CA), 39 R.F.L. (3d) 356 (Ont. C.A.) confirmed that a spouse was not entitled to deduct the $17,000 she contributed before her marriage to the cost of a dwelling that became their matrimonial home after marriage. The Court affirmed the decision of Saunders J in the Divisional Court (1989) 1989 8766 (ON SCDC), 25 R.F.L. (3d) 316 who held that the monies paid was an investment in the property that was the matrimonial home at the time of separation and as such was not deductible in calculating her net family property.
[25] The Court in D’Amico did not appear to have been referred to this decision or the law that the payment in effect meant that the husband had an equitable interest in the matrimonial home. In addition there is an issue that need not be decided of whether the respondent wife because of the joint purchase of the matrimonial home also had an equitable interest in it to the extent of that deposit paid to the vendor/builder.
[26] Accordingly, based on the binding decision of Michalofsky and given the circumstances of this case, the deposit funds of $18,393 paid by the applicant do not constitute property owned by him other than the matrimonial home on the date of marriage and are not to be deducted from his family property on the date of separation.
Applicant’s RRSP and Debts and Liabilities Owned at Date of Marriage
[27] The parties agree that the applicant owned a Manu Life RPP valued at $72,364 at the time of marriage. This amount would normally not be included in the applicant’s net family property.
[28] However, the respondent’s position is that approximately 1 year after their marriage, the applicant transferred that particular asset including its increased value of $80,500 to his former spouse because those monies were owed by him to her as a debt or liability for an equalization payment of their net family property when he married the respondent. Accordingly, her position is that the applicant should be required to deduct this $80,500 payment from his net family property or value of that RPP owned at the date of marriage.
[29] The applicant’s evidence was that he separated from his first wife in September 2009. He states that on October 4, 2010, one year later, his former spouse of 16 years asked him to attend at her lawyer’s office in Toronto to sign a separation agreement. He said he did attend at that office with her and signed a separation agreement. He said she wanted an equal share of their matrimonial home proceeds but not an equal share of their RRSP’s. He stated he had no independent legal advice, that his wife paid for the lawyer but can’t say he gave her legal advice.
[30] He later attended at the courthouse shortly after that for the granting of her divorce application.
[31] The applicant did not call his former spouse or that lawyer as witnesses to confirm any of this evidence as being factual and in particular that she did not initially claim against the parties’ RRSP’s or ask for an equalization of their net family property.
[32] In March 2012, three months after his marriage to the respondent, the applicant’s former spouse commenced an application against him to claim an equalization payment regarding their net family property and to set aside the separation agreement.
[33] The applicant admitted there had been no formal financial disclosure exchanged by him and his former spouse before the separation agreement was signed. He stated that his former spouse knew after 16 years of marriage what his assets were. Again, his former wife did not give evidence to verify any of that yet he denied at trial her hearsay allegations in her application document that he failed to provide proper financial disclosure to her and that contradicted his evidence of the circumstances of the signing of that agreement. Those allegations were not admitted in evidence for the truth of their contents.
[34] The applicant’s evidence was that in January 2013 he had a discussion with the respondent who encouraged him to simply pay some money to his former spouse to settle her claim. He did so by way of consenting to a court order dated January 15, 2013 that he transfer to his former spouse his Manu Life RPP now worth $80,500 by way of a tax-free rollover.
[35] I do not accept the evidence or position of Mr. Zheng that the separation agreement he signed in October 2010 with his former wife was intended by her to or in fact constituted a settlement and release of her claims for an equalization of their net family property. As indicated above, the applicant did not call his former spouse or the lawyer to establish that. That one page poorly drafted separation agreement does not provide for a release of spousal support; it simply states that each of the parties is financially independent and does not require financial assistance from the other after divorce. More significantly, it also only provided for the sale and division of the net proceeds of the matrimonial home and made no reference whatsoever to a settlement or an equalization of the parties’ net family property including the applicant’s RRSP’s.
[36] Accordingly, I am not satisfied that the applicant has established that there was a settlement or agreement reached with respect to his debt obligations to his former wife for the amount of the equalization payment owing to her because of the provisions of the Family Law Act.
[37] The evidence confirms that the applicant clearly recognized after the marriage to the respondent his obligation to pay that significant debt or liability owing to his former spouse by consenting to the court order of January 15, 2013 transferring his Manu Life RPP to her on a tax-free basis in March 2013.
[38] I reject the applicant’s position that there was no evidence that he owed his former spouse that money at the time of his marriage to the respondent and that the order that he consented to was not evidence of the recognition by him of that debt owing. His evidence that he did not believe that that order meant he owed her $80,500 was evasive, was not reasonable, and was simply convenient to try and minimize his obvious recognition that he in fact owed that money to his former spouse. He did not file any documents from that prior application as to what his actual assets were at the time of his separation from his former spouse, how much he actually owed her for an equalization payment and whether that confirmed his trial evidence.
[39] As with valuation date debts and other liabilities, under section 4(3) of the FLA the onus is on the party to prove his or her marriage date assets and deductions under the definition of net family property. Zaverella v. Zaverella 2012 ONCA 675. The onus is not on the respondent to disprove the applicant’s proposed figures. The deduction he wants to claim is the value of the Manu Life RPP of $72,364 that he owned at the date of marriage that he eventually transferred to his former spouse without deducting the value of $80,500 amount of that RPP from the value of his property calculated as of that date.
[40] The provisions of the Family Law Act required the applicant, assuming he had the larger net family property, to pay one half of the difference to his former spouse to equalize their net family property. It was the statute because of the valuation and division of assets principle, that gives rise to a debtor-creditor relationship in the sense that the creditor spouse obtains a monetary claim against the debtor spouse. That debtor–creditor relationship between married spouses arises when one spouse has the right to claim an equalization payment from the other on separation with no real prospect of the resumption of cohabitation. Stone v Stone, 2001 24110 (ON CA), [2001] O.J. No. 3282 (Ont. C.A.). At the end of the equalization process, a monetary debt is owed by the applicant to his former spouse in no specific property that is or would either be transferred or divided as a result of the equalization procedure. Schreyer v. Schreyer 2011 SCC 35.
[41] There never was an equalization of their net family property nor does the separation agreement they signed provide for that or any release in favour of the applicant by his former spouse regarding their net family property.
[42] His obligation to pay his former spouse that equalization payment existed at the time of his marriage to the respondent on November 11, 2011 although the exact amount may not have been known then to his former spouse. It was not an obligation that arose only after the date of his marriage to the applicant. In my view, the fact that the amount was not paid by him to his former spouse until after the marriage is of no moment being no different than if he was owed money at the date of marriage but did not receive it until after. DaCosta v DaCosta (1992), 1992 7749 (ON CA), 7 O.R. (3d) 321 (C.A.). This case in my view is not similar to Cosentino v. Cosentino, 2015 ONSC 271 where all the events that led to the CRA assessment of the appellant’s tax liability on income earned during the marriage took place after the parties’ separation and the Court held it was not a contingent liability as of the date the valuation date.
[43] Given the wording of that October 2010 separation agreement which does not include any release of the applicant’s obligation to pay the equalization payment owing to his former spouse and the lack of any admissible evidence that she released or intended to release him of those claims, the obligation of the applicant to his former spouse was more than just a potential liability or obligation. An actual court ruling affirming that was not necessary to confirm the debt. In my view, his obligation to make that payment was foreseeable and a real possibility on the date of marriage with the respondent. Drysdale v Drysdale 1994 7453.
[44] This was not a case where there was no or a very low risk, especially given the short time frame involved, that the applicant would ever be called upon to pay that obligation which was not extinguished unlike the one in Zaverella, above. Lastly, in my view the word “liabilities” is a very general one and must be given a broad, liberal interpretation as including debts and contingencies. Burke v. Burke (1987), 1987 6944 (MB QB), 47 Man. R. (2d) 216, 8 R.F.L. (3d) 393.
[45] Accordingly, the $80,500 paid by the applicant’s former spouse would normally be found to be the amount of the liability or debt of the applicant on the date of marriage. However, in fairness to the applicant, given his evidence that the settlement with his former spouse was reached by his simply transferring that RPP on a tax-free basis to her, it would be more reasonable and appropriate to find that the amount of the applicant’s debt or liability at the date of marriage was equal to the value of that RPP asset on the same date that it was eventually transferred to the former spouse. Accordingly, I find that the appropriate debt or liability of the applicant at the time of marriage was the same $72,364 amount which shall be deducted from the value of his property owned at that time.
Notional Disposition Costs of Applicant’s Condominium in China
[46] The respondent in 1997, 14 years prior to the parties’ marriage, purchased a condominium in China which was essentially paid for by the time of the parties’ marriage in November 2011. The parties have agreed that the date of marriage value of the condominium was $370,876 and the date of separation value was $626,367.
[47] The respondent continues to own that condominium and wants to deduct notional disposition costs because of the likely sale of the property within five years inclusive of real estate commission, legal fees on the sale and income tax payable by the respondent as a result of the capital gains that would be incurred on the sale.
[48] The applicant disputes that the respondent should be entitled to any such deductions including the notional capital gains tax payable on the calculation of her net family property.
[49] The respondent on her uncontested evidence which I accept acquired that condominium which was just a shell in 1997 with her previous spouse as owners. She received significant cash gifts from her parents and a contribution from her previous spouse along with her own contribution to buy the unit and also included significant funds to complete the construction of the shell unit. Monies were also borrowed by her with respect to those costs incurred and there was essentially no debt owing against that condominium unit at the time of the marriage of the parties in November 2011.
[50] The condominium was never occupied by the parties and neither the applicant nor the respondent were required to and did not contribute any expenditure of funds towards that unit for expenses since the date of marriage. The property increased in value only because of the thriving Chinese economy, real estate market forces and the strong value of the Chinese currency. In particular, the applicant has not seen and has contributed nothing at any time towards that condominium directly or indirectly during the marriage of the parties.
[51] I accept the respondent’s evidence that the parties had discussions in 2012 and 2013 regarding the sale of that unit with the applicant regularly pressing the respondent to sell the condo and potentially invest the proceeds in Canada including paying off the mortgage on their jointly held home. The respondent was reluctant to do so believing the unit should be available for their retirement years to live there. Nevertheless, she agreed because of his requests at some time in 2012 to sell the unit. She traveled to China in August 2013 to complete a sales transaction for that condominium that had already been entered into with a third-party for the purchase of the unit before she arrived. Unfortunately, that sale fell through and was not completed through no fault of her own but rather because of the purchaser’s fault.
[52] Her evidence at trial was that she now has plans on selling the condominium in the near future and within the next five years. Her reasons for doing so include the fact that she is required to repay approximately $100,000 to her mother because of loans made by her mother to her to help pay for her legal fees incurred in this litigation. Her elderly mother who was treated for cancer here in 2014 now resides permanently with her in Brantford.
[53] The applicant does not dispute that the respondent in fact has incurred that $100,000 loan obligation to her mother even though there is no supporting documentation for that loan.
[54] The respondent’s evidence that she did not want to sell the unit in 2012 to 2013 because she wanted to keep it for their retirement likely no longer applies since the date of their separation.
[55] Her evidence at trial was that when the unit is sold, she will incur real estate commission fees of 5% of the sale price in China along with tax deed fees of 3% of the sale price based on her personal knowledge of those fees.
[56] She is also aware of her obligations under the Canada Income Tax Act to pay income tax on any taxable capital gains she earns on the sale of that property. The Court did not permit her to call expert evidence on the amount of the capital gains to be incurred on the sale because of the late service of the expert’s report only on the morning of trial over the objections of the applicant because of the prejudice he would suffer by not being able to obtain his own expert opinion, among other reasons.
[57] Nevertheless, the applicant, who is a certified accountant with significant experience in corporate accounting for his employers, admitted that capital gains tax would in fact be payable on the sale of the condominium. He simply would not admit the amount of capital gains tax payable stating he did not have the expertise in part because of the effect of potential tax treaties between Canada and China. Nevertheless, he referred to and filed as evidence a detailed brochure from the Canada Revenue Agency essentially confirming the calculation of the capital gains tax payable based on one half of the difference between the net sale price of the condo less adjustments and the adjusted cost base of the condominium.
[58] The respondent’s evidence was that the initial cost of unit was approximately $50,000 plus $100,000 in subsequent renovations.
[59] In my view, given that it is only the increase in value of the condominium from the date of marriage to the date of separation that is potentially included in the respondent’s NFP, the potential disposition costs should also be based on the consideration of those values.
[60] Accordingly, real estate commission at 5% of the value of the condominium on the date of separation of $626,367 would be approximately $31,300. The deed tax in China at 3% would be approximately $18,800.
[61] When those amounts are deducted from the value of the condominium, the net sale amount would be $576,258.
[62] The amount of the capital gain during the period of the marriage of the parties would be the difference between that $576,258 value and the value at the date of marriage of $370,876 being approximately $205,000.
[63] The taxable capital gain that would be included in the respondent’s income would be one half of that or approximately $100,000. The income tax payable on that amount at a 25% tax rate would be approximately $25,000 and $50,000 using a 50% tax rate.
[64] Given the evidence available to me at trial including the respondent’s other annual employment income of approximately $35,000 and in the absence of expert evidence, the reasonable and fair assessment of the capital gains tax payable on the sale of the condominium would be approximately $30,000.
[65] The issue then is whether the respondent should be entitled to deduct those notional disposition costs of the real estate commission, deed tax fees and capital gains tax from the amount of the increase in the value of the condo accumulated during the marriage of $255,500.
[66] Given the evidence at trial, it is more likely than not that the condominium will be sold within the next five years by the respondent. It is significant that she attempted to sell the condominium unit since 2012 and in August 2013 had an agreement with a buyer to sell it then which was not completed through no fault of her own. Her evidence, which I accept, is that the condominium will be sold by her in order to repay her mother the approximate $100,000 that she has borrowed from her to fund the legal costs she incurred in this application commenced by the applicant.
[67] I note that in Buttar v. Buttar, 2013 ONCA 517 @ para.22 the Ontario Court of Appeal confirmed that the appellant’s requirement to sell some of his property in order to pay taxes he owed on the sale of some equipment was evidence that he would inevitably incur capital gains tax entitling him to a deduction of those disposition costs.
[68] The respondent’s evidence which was not disputed is that she will on the disposition and sale of the condominium incur real estate commission of 5% and the deed tax on that sale at 3% of the sale price respectively. The applicant admits and the CRA document he filed confirms that she will be required to pay Canadian capital gains tax based on the increase of that value.
[69] This is not a case where the sale of the condominium unit is simply speculative without any evidence of any contemplated or date of eventual sale. Sengmueller v. Sengmueller 1994 8711 (ON CA), 1994 17 O.R. (3d) 208 (C.A.); Buttar v. Buttar, above; Bortnikov v. Rakitova, 2016 ONCA 427.
[70] The relevant inquiry is whether there was a reasonable likelihood as of the date of separation that the respondent would sell her condominium and if so at what reasonably anticipated value. Berta v. Berta 2015 ONCA 918.
[71] The actual sales agreement entered into for that condominium in August 2013 was approximately a year and a half before the parties’ final separation at a time when the respondent’s mother was moving to Canada from China. She now resides here on a permanent basis with no contemplation of moving back to China, and there is no need now for the respondent to retain it.
[72] Accordingly, although the respondent indicated her decision to sell came after the Trial Management Conference in August 2017, there is a reasonable inference from all of the respondent’s evidence that her intention now of selling the condominium with the next five years is really nothing more than a continuation of her intention she had all along to do so both during the parties’ cohabitation and as of the date of separation.
[73] Accordingly, the respondent is entitled to deduct notional disposition costs of approximately $31,300 real estate commission, $18,800 for deed tax and $30,000 for capital gains tax for a total of $80,000 from the increased value of $255,500 of the condominium that accrued during the marriage. This leaves a net sum of $175,000 to be included in her net family property regarding that condominium.
Notional Disposition Costs regarding the Parties’ RRSPs
[74] On the date of separation, the applicant owned a Manu Life RRSP with the value of $13,600. He also owned a TD pension plan valued at $3307.
[75] The respondent on the date of separation had RRSPs with Scotia Bank of $9503 and $11,892.
[76] The parties both owned some RRSPs on the date of marriage.
[77] The respondent’s position is that in calculating the net family property of both parties, notional amounts of 20% of those values should be deducted for income tax payable on the eventual realization of the assets even though the applicant’s income is significantly higher than hers.
[78] The applicant disputes that that should be done for either his or her RRSPs and pension plan respectively. He did however state that his marginal income tax rate on his approximate $85,000 income was about 20%.
[79] Given the reasoning in Sengmueller, the court should apply the overriding principle of fairness i.e. the costs of disposition as well as benefits should be shared equally. RRSPs in particular are taxable in full regardless of the time of realization whether they are cashed in total or taken by way of annuity.
[80] Given the particular facts in this case, the likelihood of tax payable on the disposition of the RRSPs in the future and the relative equal amount of the assets owned by the parties (although the respondent owns slightly more), it would be appropriate to allow a deduction of approximately 20% of the value of each of their RRSPs and pension amounts owned by them on the dates of separation and marriage in calculating their respective net family property.
[81] Those 20% deductions accordingly will be allowed against those assets owned by both parties respectively on both the dates of valuation and marriage.
Respondent’s Ford Fusion- Excluded Property Issue
[82] The respondent claims that the value of the Ford Fusion car registered in her name in the amount of $12,000 should be excluded from her net family property on the date of separation as she obtained a gift of $15,000 from her mother to pay-off their joint loan used initially to purchase that vehicle.
[83] On August 11, 2012 the respondent’s evidence was that she with the applicant’s consent signed an agreement at a dealership for her purchase of the Ford Fusion at a cost of $20,336. A $336 deposit was paid on that date.
[84] On August 15, 2012 the day before they were to take delivery of the vehicle, the applicant wrote a letter to the dealership signing it in the respondent’s name canceling the deal. The respondent stated that the applicant was very upset with her and insisted that she had to pay for the vehicle herself from her funds given that he had brought his own vehicle worth $15,000 into the marriage relationship. He canceled the deal on August 15 she said to pressure her into agreeing that she would pay for the car with her own funds. They talked until midnight that evening and the respondent finally agreed to do so with the funds to come from her mother then living in China by way of gift to her.
[85] The respondent’s mother Liao Shilian confirmed that she offered to give her daughter $15,000 for the purchase of the Ford Fusion and she did not ask for that money back prior to the parties’ separation. That evidence was not challenged in cross-examination by the applicant. I accordingly accept her evidence to that effect.
[86] The parties then proceeded with the purchase the next day with the $20,000 balance of the payment for the vehicle initially being made on the parties’ joint visa account to the dealership. The respondent then received a gift of approximately $30,000 seven months later in March 2013 from her mother and used $15,000 of that to pay for the balance then owing on the joint vehicle loan as she had agreed.
[87] The applicant insisted at trial that the respondent’s credibility was very much in issue on this point as well as several others. He initially denied her version of these events stating that he tried to cancel the deal only because he found another vehicle at another dealership with more options for $6000 less. However, he agreed on cross-examination when he reviewed the purchase agreement for the vehicle that his initial sworn evidence was wrong.
[88] The applicant’s initial incorrect evidence does not appear to have been given inadvertently. It also does not dispute the respondent’s evidence of the pressure he placed on her to obtain a gift of money from her mother to purchase that vehicle. The respondent’s evidence was also that the applicant insisted on driving that vehicle exclusively to work daily for three years while she then drove his older and smaller car. I accordingly accept the respondent’s evidence entirely on this issue over the evidence of the applicant.
[89] The onus is on the respondent to trace the gift of $15,000 from her mother from its original form into the Ford Fusion asset in existence at the date of separation.
[90] The purchase of the vehicle was financed initially by both parties borrowing funds from their joint visa account. Both parties then apparently contributed payments on that account with their joint funds. The joint loan was paid down by approximately $5000 until the receipt of the gift of funds from the respondent’s mother seven months later in March 2013. At that time, $15,000 of that gift was used to pay down that joint debt.
[91] The case of Fotheringham v Fotheringham 2004 5049 ONSC involves relatively similar facts. In that case, the wife purchased a vehicle in August 1999 for $24,000 expecting a future settlement of her personal injury action to eventually cover the purchase price. The initial purchase was financed by way of the parties’ joint line of credit. Six months later in February 2000, the wife obtained her settlement funds and used $22,000 of it to pay off the joint line of credit of her and her spouse.
[92] The Court held that the wife was not able to trace her personal injury funds into the acquisition of the asset and that the entire value of the asset was included in her net family property.
[93] The only difference in the facts of that case compared to this one is that the monies eventually obtained six months later to pay off the joint loan on the asset already acquired by the wife came from her personal injury settlement as compared to a gift of funds seven months later from the respondent’s mother to pay off the joint line of credit in this case. That is not a difference of any significance.
[94] Accordingly, the respondent is not entitled to a declaration that the $12,000 value of the Ford Fusion is excluded from her net family property and shall be included in it.
Respondent’s Alleged $20,000 Gift from Her Mother
[95] The evidence of Liao Shilian was that when she immigrated from China to Canada to live with the parties in August 2013, shortly after that she lent the respondent $20,000 as she saw they were not happy, money for them was tight and she wanted the best for them. She did not state initially what the funds had to be used for and told them she had no more money to lend them. She wanted the money back which she said the respondent told her she was going to use to pay towards the outstanding mortgage on the matrimonial home.
[96] The respondent’s position is that those monies provided to her were a loan from her mother which she used to pay down the joint house mortgage and which loan was still owing as of the date of separation.
[97] That position is disputed by the applicant who states it was a gift. If it was a gift and used to pay down the mortgage on the matrimonial home, the gift would not be excluded property deducted from the respondent’s net family property on the date of separation. Barber v. McGee 2015 ONSC 8054.
[98] The respondent’s evidence was that when she arrived back from China with her mother in August 2013, the applicant was not very happy with her because of the canceled sale of the China condominium. He accused her of canceling it on her own. He had been pressuring her constantly since 2012 to sell the condo in China and use the proceeds to pay off their joint mortgage on their house.
[99] In order to keep peace in the family, she asked her mother to loan her $20,000 because of the physical stress her husband was under and her feeling guilty that she was not contributing as much to the matrimonial home. She agreed to repay her mother once she sold her China condominium and said she would use that loan to pay down the mortgage on the house.
[100] She received a cheque from her mother on September 6, 2013 and immediately paid the joint mortgage down that day in that amount.
[101] There were no documents evidencing the alleged loan to her mother and the respondent did not make any payments to her mother including interest on that loan prior to her separation.
[102] She stated her mother needed the funds and asked her to pay it back after the parties’ separation. Her mother did not say that in her evidence. The respondent said she did so by borrowing $20,000 from a close friend but no other details or supporting documentation of that including the date that money was obtained or the name of the person who loaned it were provided to the Court. She stated her friend loaned her $20,000 to give to her mother so that she wouldn’t constantly worry about not having any funds.
[103] The applicant states that he was told by the respondent during their cohabitation that the money was gifted by the mother as she was happy to have been able to move to Canada, it was also for a wedding gift and a contribution to her living expenses they incurred for her while she lived with them.
[104] Although the absence of supporting documentation for the alleged loan from her mother is a concern to the Court, it is nonetheless significant that the applicant did not dispute the fact that the respondent had also borrowed approximately $100,000 over time from her mother to help pay for her legal fees incurred because of this application. Her mother confirmed that evidence stating that she sold her property in China and loaned her that money for that purpose. Similarly, no documents were signed by the respondent and her mother regarding those loans and the applicant is not disputing the respondent’s evidence that those substantial advances were in fact loans.
[105] It was not totally clear on the evidence as to whether or not this $20,000 borrowed by the respondent from her close friend was specifically related to the repayment of the initial $20,000 September 2013 loan from her mother or to her overall substantial indebtedness to her mother.
[106] Notwithstanding the absence of documentation to establish the alleged $20,000 loan, the circumstances here confirmed that the $20,000 amount paid in September 2013 was by way of loan to the respondent rather than a gift. The method of arranging that loan in the absence of supporting documentation was no different than the other admitted loans to her of approximately $100,000 for her legal fees. Traversey v. Glover, 2006 24130 (ON SC), [2006] O.J. No. 2908.
[107] In my view however, the real issue is whether or not the respondent has or would eventually ever repay the entire amount of that initial $20,000 loan to her mother. She is the only child and the evidence from her mother was that parents in China gave monies to their children and in particular the only child to help them.
[108] In my view, the Court should take into account the absence of any supporting evidence or documents confirming that the respondent actually borrowed $20,000 from a friend to pay back this specific $20,000 initially loaned by her mother and the potential that this specific loan may not have been or ever will be repaid by the respondent to her mother and certainly not in the full amount.
[109] Accordingly, only the sum of $5,000 should be attributed to the respondent as a debt owing by her on this loan on the date of separation rather than the full amount of $20,000. Poole v. Poole (2001), 2001 28196 (ON SC), 16 R.F.L. (5TH) 397; Zavarella v. Zavarella 2013 ONCA 720.
Equalization of Net Family Property- Unconscionability
[110] Based on these adjustments and the parties’ agreement on the values of their property, it appears that, excluding their equal proceeds from the matrimonial home, the applicant’s net family property on the valuation date is $59,734. The respondent’s net family property on the valuation date is $246,732 (See schedule A).
[111] Based on those amounts, the applicant would ordinarily be entitled to an equalization payment from the respondent in the amount of $93,499 under s. 5(1) of the FLA.
[112] The respondent’s position is that the equalization of the net family properties on this basis would be unconscionable under s. 5(6) of the FLA having regard to the following three factors:
a) the applicant’s failure to disclose his debts or other liabilities existing on the date of the marriage;
e) the fact that the amount the applicant would otherwise receive is disproportionately large in relation to the period of cohabitation that is less than five years;
h) any other circumstance relating to the acquisition, disposition, preservation, maintenance or improvement of property.
[113] S. 5(7) of the FLA confirms that the purpose of the equalization scheme of the Act is to recognize that childcare, household management and financial provision are a joint responsibility of the parties and that inherent in the marital relationship, there is equal contribution whether financial or otherwise by the spouses to the assumption of those responsibilities entitling each spouse to the equalization of the net family properties subject only to the equitable considerations set out in s. 5(6).
[114] The Ontario Court of Appeal in Sera v. Sera 2009 ONSC 105 (Ont. C.A.) confirms that circumstances which are unfair, harsh or unjust alone do not meet the test of unconscionability. To cross the threshold on unconscionability, one needs an equal division of net family properties in the circumstances that must shock the conscience of the court arising either from fault-based conduct or from the financial result that the spouses are left with. The test to be met is a high one and does not simply mean inequitable.
[115] In this case, the evidence is clear that the majority of the discrepancy between the applicant’s and the respondent’s respective net family properties results because of the $255,000 increase in the value of the respondent’s condominium in China since the marriage solely due to economic conditions of the Chinese economy during the marriage and not because of any contributions, financial or otherwise thereto by either of the parties during the marriage.
[116] The applicant earned a higher income than the respondent during their short marriage. He stated that based on his approximate average annual income of the $84,000, he contributed approximately $276,000 gross income during the marriage by depositing his paychecks into their joint account.
[117] On the other hand, during that same period, he states that the respondent only contributed approximately $114,000 gross income based on her approximate average income of $33,000.
[118] However, based on Exhibit 4, he was actually contributing to the joint account only his net income of approximately $164,000. From that he then paid significant $758 monthly child support payments he was also making to his former spouse and the contributions he was making towards his son’s RESP’s as well as his annual contributions to his own RRSPs.
[119] The respondent’s net contributions were about $73,000.
[120] The applicant also benefitted from the increase in value of the matrimonial home and increased equity after the parties’ final separation until its sale when the respondent paid all the expenses including the mortgage, insurance, repairs and taxes totaling $39,000 from June 2015 and while he paid no spousal support. In addition, he paid nothing into that account for three months in late 2014 when the parties were initially separated.
[121] I do not find that the applicant’s co-sponsoring the respondent’s mother to immigrate to Canada was a significant financial contribution he made to the parties’ short marriage. I am not satisfied that his evidence establishes that his co-sponsorship was necessary given the income of the respondent and her evidence that her application for her mother had already been filed in 2008 long before her relationship and cohabitation with the applicant. The applicant did not suffer any financial cost because of that co-sponsorship in any event.
[122] The parties did not have any children together. The respondent continued to work during their cohabitation at a lower income that she contributed toward the marriage. None of her employment income earned was used by her towards any expenses or other costs of that China condominium during the marriage. Even though she had a lower income than the applicant, she was also responsible for almost all the meal preparation and household tasks and cleaning for both her and the applicant.
[123] Moreover, as indicated above, none of applicant’s financial contributions he made during the marriage resulted in the respondent directly or indirectly obtaining an increase in the value of her condominium which he has never seen.
[124] The applicant has also benefitted from the $15,000 gift received from the respondent’s mother in March 2013 obtained at his insistence to purchase a new vehicle in her name but which he then drove exclusively to work for over three years. The gift proceeds were used to pay off a joint debt on that vehicle after it was purchased.
[125] He has also benefitted from most of the original $20,000 advance made in August 2013 from the respondent’s mother after he became upset when the respondent returned from China not having sold her condominium there. That $20,000 was used by the parties to pay down their joint mortgage only $5000 of which I have found is to be credited to her as an outstanding loan obligation at the time of separation.
[126] There was no evidence of any monetary gifts received by either or both parties from the applicant’s parents.
[127] The respondent’s evidence, which was not contradicted or challenged in cross-examination by the applicant and which I accordingly accept, is that the applicant told her when they were getting married that he was marrying her for love and not money and that he would not make any claim against her China condominium although he did not sign a formal marriage contract to that effect.
[128] The applicant, despite this pre-marriage agreement, on several occasions after the marriage in 2012 and 2013 pressured the respondent to sell the condominium and use the proceeds to pay down the $150,000 mortgage on their matrimonial home. I also accept the respondent’s evidence that he told that if she did that, if they subsequently separated she would only lose 50% of those proceeds used to pay off the mortgage on the matrimonial home.
[129] The applicant hesitated in his evidence for a lengthy period of time before eventually denying that he pressured the respondent to sell the condominium and use the proceeds to pay off their house mortgage. His evidence that he did not want the China condominium sold for that purpose is simply not factual and I do not accept his evidence in that regard. I also do not accept his evidence that he agreed to co-sponsor the respondent’s mother because the respondent and her mother promised to pay off their joint house mortgage if he did.
[130] It would be beyond inequitable now to permit the applicant’s attempt to resile from his pre-marriage agreement with the respondent regarding her China condominium in those circumstances.
[131] There may have been an initial failure on the part of the applicant to disclose his liabilities at the date of marriage. However, as indicated above, that has already been taking into account by reducing the value of his assets owned on the date of marriage being the RRP that was eventually transferred to his former spouse by the amount of that liability. It would not be appropriate to further consider that failure as a factor suggesting a finding of unconscionability under s. 5(6)(a) although it would be if that deduction had not been required.
[132] The parties each contributed $100,000 towards the purchase of the jointly held matrimonial home to be sold and the proceeds are to be divided equally between them after payment of the existing mortgage and sale fees incurred.
[133] In this case, it is appears that the applicant would receive a disproportionately large share of the net family properties if equalized in relation to the period of cohabitation less than five years and relating to the acquisition, maintenance or improvement of the property.
[134] The Court has recognized a finding of unconscionability for parties who cohabited less than five years where one spouse’s disproportionate share of the net family property results from the significant value of the major asset being the matrimonial home owned by the other spouse prior to the marriage.
[135] However, a finding of unconscionability regarding an equalization payment is not restricted to cases when the major asset involved is the matrimonial home. Sera v. Sera, above.
[136] The Ontario Court of Appeal in Gomez v. McHale 2016 ONCA 318 recognized that courts have looked at the actual period of cohabitation and then fixed an unequal division of net family property using that period as a percentage of the five-year statutory period. It held that section 5(6) requires only that the court look carefully at the backgrounds of both parties, determine whether an equal division would be unconscionable and if so, fix what the court regards as a reasonable figure that is fair, just and equitable in considering all the evidence. The court upheld the trial judge’s finding that the appellant wife was only entitled to the payment of $60,000 rather than her 4/5 entitlement of otherwise entitlement of $268,000 i.e., $214,000 because of their four-year period of cohabitation. The Court found that a mathematical formula may be of assistance in some cases, as in Sarcino v Sarcino,[1999] O.J. 902 and Kucera v. Kucera (2005), 2005 12854 (ON SC), 16 R.F.L. (6th) 250, although the motion judge did not err by not applying it.
[137] In Sarcino, the Court awarded one spouse 42/60 of his otherwise share of the net family property when the parties cohabited for only 42 months.
[138] The recent decision of Kruschenke v Kruschenke, 2018 ONSC 4342 after considering Gomez v. McHale, used the percentage formula on finding a spouse’s disproportionate share of the net family property for their 50 month period of cohabitation unconscionable. The other spouse, the husband, had brought almost all his present assets into the marriage and particularly the matrimonial home. The court awarded the wife 80% of NFP equalization applying a time-based formula of one year less than the five year threshold.
[139] Given all of the circumstances of this case as described above, including the cohabitation of only 39 months, the amount the applicant would otherwise receive as a full equalization payment of $93,499 from the respondent would shock the conscience of the court and hence is unconscionable.
[140] The applicant is entitled to a fair and reasonable amount that is just and equitable by way of equalization which in my view is a payment of approximately 70% of that otherwise equalization amount which I round up to $65,500.
[141] That results in a payment owing to the applicant by the respondent of the sum of $65,500 for the equalization of the parties’ net family property in addition to the parties’ entitlement to share equally in the net proceeds of the sale of their jointly held matrimonial home.
Occupation Rent
[142] The applicant claims he is entitled to occupation rent from June 2, 2015 to date because of the false accusation made against him by the respondent resulting in his being arrested and charged with assaulting her and his removal from the matrimonial home. The respondent has resided along with her mother in the matrimonial home since then.
[143] The applicant states the false allegations relate to the respondent telling the police on June 2, 2015 that he assaulted her on April 4, 2015. He referred to two prior statements she had given to the police some of which contained some inconsistencies with that allegation including whether he slapped or punched her, whether there was any physical contact at all and whether the date of the assault was in March rather than April. He denied that he ever assaulted her.
[144] The respondent however maintained adamantly at trial that he did and in fact had also done so on previous occasions as well. She provided photographs of what she said depicted damages to their bathroom door hanger and wall because of that incident. The small indentation damage to the wall appeared to be very minimal.
[145] The applicant states that the Crown withdrew the assault charge against him in October 2015 with the suggestion that that confirmed the falsity of respondent’s allegation. However, the withdrawal of that assault charge was on the condition that he was required to enter into a peace bond with his wife which required him to stay away from the matrimonial home. He had legal counsel acting for him at the time and I do not accept his evidence that he did not fully understand then the significance of the peace bond including that it was entered into by him because of there being reasonable grounds to establish the need for one which would likely relate to the assault allegation.
[146] A claim for occupation rent is an equitable claim and although that there may be some substance to the applicant’s claim regarding some of the allegations the respondent made to the police, his voluntarily entering into the peace bond with that condition also confirmed the need for one based on his own actions.
[147] In any event, the respondent’s peace bond eventually expired in October 2016. The applicant made no effort to try and return to the home after that date including requesting his wife that he be allowed to return. He brought no motion in court allowing him to do so. He brought no motion requesting the sale of the matrimonial home before trial.
[148] He did not provide any evidence at trial as to the fair market value of the rent for the Brantford house. I declined to permit him to call expert evidence on that issue also because of the very late service of that report shortly before the trial. The applicant only gave evidence from his personal knowledge of rents on houses in Cambridge which he admitted were higher than Brantford. He stated he didn’t have any evidence of what the occupation rent would be from the date of separation to the date of trial.
[149] I am not satisfied that the applicant has established that he was removed from the matrimonial home through no fault of his own because of the respondent’s false allegations entitling him to an equitable claim for occupation rent since June 2, 2015 to date. Moreover, the applicant made no claim for occupation rent in his original application until he amended it in October 2016.
[150] Even if I were so satisfied, I am not satisfied that the fair market value of the occupation rent for the matrimonial home in Brantford is $1500 per month as he claims with 50% attributed to his share.
[151] Moreover, the applicant does not dispute that the respondent in fact paid for all the carrying costs of the matrimonial home including the mortgage, utilities, taxes, insurance, maintenance and repairs totaling $39,000 from June 2, 2015 onward. He contributed nothing towards the home’s expenses during that time and the home has increased in value to their joint credit since then. It appears that any successful claim the applicant may have for occupation rent would essentially be offset by his requirement to be responsible for one half of those costs paid by the respondent.
[152] In my view, it is not appropriate to award the applicant an amount for occupation rent or the respondent an amount for her offsetting share costs of maintaining the home since the separation of the parties. Accordingly, the applicant’s and respondent’s claims in that regard are both dismissed.
Conclusion
[153] On consent, the matrimonial home of the parties at 39 English Lane Brantford shall be sold and the net proceeds after payment of real estate commission, legal fees and disbursements on the sale are to be divided equally between the parties.
[154] The respondent shall pay to the applicant an equalization payment of $65,500. The balance of his claims are dismissed.
[155] The claims of the respondent are dismissed.
[156] If the parties are unable able to agree on the issues of prejudgment interest and costs of this action, the applicant shall provide his brief submissions of no more than three pages in length together with a bill of costs and any relevant offers to settle to the trial coordinator in Brantford within 15 days from the date of this decision.
[157] The respondent shall similarly be entitled to respond within 10 days thereafter.
[158] If no written submissions are received within those timelines, the parties will be deemed to have resolved the issues of prejudgment interest and costs.
Released: February 13, 2019
SCHEDULE “A”
Parties’ Net Family Property
ITEMS AND DESCRIPTION
HUSBAND
WIFE
1.Value of Assets Owned on Valuation Date
Matrimonial Home- 39 English Lane, Brantford
182,000
182,000
China Condo
626,367
Household Goods and Furniture
5,500
Vehicles - 2012 Ford Fusion
12,000
2008 Chevrolet Cobalt
6,956
Bank Accounts and Savings
-Chequing-Scotiabank
2,360
-Savings-Scotiabank
2
-GIC-US- Scotiabank
4,217
-RRSP-Scotiabank
9,534
-Chinese Bank Account- Bank of China
6,073
-TD Pension
3,307
-Savings- Scotiabank
1
-TD Canada Trust Bank Account
7,711
-Non Registered Mutual Fund- TD Canada Trust
2,070
-Power Chequing- Scotiabank
109
109
-Savings- Scotiabank
1,004
-Savings-Scotiabank
562
-RRSP-TD Mutual Funds
8,284
-TFSA-TD Mutual Funds
39,520
-RRSP- Scotia iTrade
11,892
-RRSP-Manulife
13,600
-Chequing/Savings-TD Canada Trust
200
-Chinese Bank Account- Bank of China
200
Value of Property Owned on Valuation Date (TOTAL 1)
$271,596
$853,982
2.Value of Debts and Liabilities on Valuation Date
Matrimonial Home- 39 English Lane Mortgage
40,083
40,083
Real Estate Commission- sale of matrimonial home
11,800
11,800
Legal Fees and Disbursements-sale of matrimonial home
600
600
Notional Disposition- China Condo Capital Gains Tax; Real Estate Commission Tax Deed Fees
30,000 31,300 18,800
Credit Card- Scotiabank Gold Amex
133
Credit Card-Scotiabank Momentum Visa
328
328
Credit Card- Scotiabank- Momentum Visa
121
Loan from Respondent’s Mother
5,000
Notional Disposition- Scotiabank RSP
1907
Notional Disposition- RPP
664
Notional Disposition- TD Pension
1,671
Notional Disposition- Scotia iTrade
2,378
Value of Debts and Liabilities on Valuation Date ( TOTAL 2)
$55,146
$142,450
3.Net Value of Property and Debts on Date of Marriage
Property
Land- 6 Foster Street, Brantford
140, 014
China Condo
370,876
Vehicles
Chrysler Neon
1,000
Chevrolet Cobalt
12,000
Bank Accounts and Savings
US Savings- Scotiabank
582
Manulife RPP
72,364
TD Canada Trust
17,186
Scotiabank Savings
135,711
Bank of China
3,210
Power Chequing
272
US Daily Interest
832
US Scotiabank
5,436
Scotiabank RSP
4,112
Scotiabank Account
2,500
2,500
Scotiabank Account
20
TFSA Scotiabank
15,264
Scotia iTrade
8,185
Total Value of Property Items
243,553
548,511
Debts and Other Liabilities
Mortgage- 6 Foster Street, Brantford
81,262
Applicant’s debt/liability to former spouse to resolve property and spousal support claims
72,364
Notional Disposition- Scotiabank RSP
822
Notional Disposition-Scotia iTrade RSP
1,627
Notional Disposition- Manu Life RRSP
14,473
Total Value of Debts and Liabilities
86,837
83,711
Net Value of Property Owned on Date of Marriage (TOTAL 3)
$156,716
$464,800
4.Value of Property Excluded Under Subs. 4(2) FLA
0
0
Total Value of Excluded Property ( TOTAL 4)
$0
$0
Total 2: Debts and Liabilities on Valuation Date
55,146
142,450
Total 3: Value of Property owned on Date of Marriage
156,716
464,800
Total 4: Value of Excluded Property
0
0
Total 5: Total 2 + Total 3 + Total 4
211,862
607,250
Total 1: Value of Property Owned on Valuation Date
271,596
853,982
Total 5: (from above)
211,862
607,250
Total 6: Net Family Property (Total 1 – Total 5)
$59,734
$246,732
Respondent pays $ 93,499 to Applicant
COURT FILE NO.: D14925/16
DATE: 2019-Feb-13
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
LIN (DAVID) ZHENG
Applicant
– and –
QIAN XU
Respondent
REASONS FOR JUDGMENT
The Honourable Mr. Justice R.J Nightingale
Released: February 13, 2019