Court File and Parties

CITATION: Gragtmans v. Gragtmans, 2020 ONSC 250 COURT FILE NO.: FS-19-12843 DATE: 20200114 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Ian Alexander Gragtmans, Applicant AND: Marva Lee Gragtmans, Respondent

BEFORE: Madam Justice Kristjanson

COUNSEL: Sarah Boulby and Oren Weinberg, for the Applicant Harold Niman and Chloe Van Wirdum for the Respondent

HEARD: December 3, 2019

Endorsement

1This is a motion by the applicant husband, Ian Gragtmans, to stay the child and spousal support provisions of an arbitration award pending leave to appeal from the award. The position of the respondent wife, Marva Gragtmans, is that the motion to stay be heard only when the husband complies with the award, or in the alternative, that it be dismissed with costs. For reasons set out below, I decline to issue a stay of the award and dismiss the motion for a stay pending leave to appeal.

Background Facts

2Ian and Marva lived together for 19 years and have two children. The parties separated in September 2014. Ian began court proceedings; the parties later entered a mediation/arbitration agreement. The arbitration took place before arbitrator Stephen M. Grant in June 2019.

3The arbitrator released the award on September 16, 2019. The award provides that:

a. Based on imputing income to Ian of $912,000 and Marva’s income of zero, Ian shall pay Marva:

i. child support of $6,785 per month and spousal support of $22,965 per month from July 1, 2018 to August 31, 2018; and

ii. spousal support of $37,556 per month from September 1, 2018 to December 31, 2018.

b. Based on imputing income to Ian of $1,675,000 and Marva’s income of zero, Ian shall pay Marva:

i. spousal support of $69,333 per month from January 1, 2019 to August 31, 2019; and

ii. “summer” child support of $4,093 per month and spousal support of $60,525 per month from September 1, 2019 to December 31, 2019.

c. Based on imputing prospective income to Ian of $1,300,000 and Marva’s income of $20,000, Ian shall pay Marva “summer” child support of $3,193 per month and spousal support of $46,068 per month commencing January 1, 2020 until further agreement or arbitral award.

4Following the release of the award, Marva’s lawyer sought payment of arrears of $571,384, plus prospective child support of $4,093 per month and spousal support of $60,525 per month.

5Ian’s lawyer advised that Ian would be bringing a motion for leave to appeal the arbitrator’s award and a motion to stay the support terms. He conveyed that Ian would not pay in accordance with the arbitral award, but that on a without prejudice and interim basis pending the leave to appeal and stay motion, Ian would pay $50,000 arrears, prospective child support of $4,093 per month and spousal support of $21,000 per month. Ian is paying around 30% of the spousal support owed monthly under the award and has paid less than 10% of arrears under the award.

6The arbitrator awarded Marva costs of $125,000 payable promptly. Ian is also seeking leave to appeal the costs award.

The Arbitration Agreement

7The arbitrator acted under a mediation/arbitration agreement. In arbitrations, the parties may stipulate a right of appeal on a question of fact, mixed fact and law, or a question of law alone. If the parties do not stipulate appeal rights, then s. 45(1) of the Arbitration Act, 1991, S.O. 1991, c. 17 provides:

45(1) If the arbitration agreement does not deal with appeals on questions of law, a party may appeal an award to the court on a question of law with leave, which the court shall grant only if it is satisfied that,

(a) the importance to the parties of the matters at stake in the arbitration justifies an appeal; and

(b) determination of the question of law at issue will significantly affect the rights of the parties.

8In this case, by failing to stipulate appeal rights, the parties chose the narrowest of appeal rights – on a question of law with leave, that meets the requirements of section 45(1) of the Arbitration Act, 1991.

Stay Pending Leave to Appeal

9Under Rule 63.01(1) of the Rules of Civil Procedure, an order for support is not automatically stayed on the filing of a notice of appeal, nor on a motion seeking leave to appeal. The party seeking to postpone trial-ordered obligations pending appeal must bring a stay motion: A.A. v. Z.G. 2016 ONCA 660 at para. 4.

10Ian has the onus of satisfying this court that the stay should be granted based on the three-part test established by the Supreme Court of Canada in RJR-MacDonald Inc. v. Canada (Attorney General), [1994] 1 SCR 311 (“RJR”), as follows:

(a) there is a serious issue to be adjudicated on the proposed appeal;

(b) irreparable harm will result if the stay is not granted; and

(c) the balance of convenience favours a stay pending appeal.

11The overriding question to be decided is whether Ian has shown that it is in the interests of justice to grant a stay: Klasios v. Klasios, 2019 ONSC 4841 at para. 10.

Serious Issue on the Proposed Appeal

12The parties specifically chose a leave to appeal process that is limited, and in so doing, bargained for finality. This affects the scrutiny under the first branch.

13The standard of appellate review on questions of law is correctness. Due to the fact-based and discretionary nature of family law cases, trial judges and arbitrators must be afforded a high degree of deference: Wright v. Holmstrom, 2016 ONCA 360.

14In dismissing an appeal from a final support award, Justice McGee in Permack v. Schacter, 2018 ONSC 4114 states at para. 38:

In Hickey v. Hickey, L’Heureux-Dube J. emphasized the highly deferential standard of review on appeal, with specific reference to family law support cases. An appeal court should only intervene where there is a material error, a serious misapprehension of the evidence of an error of law. This flows from both the discretion involved in making support orders, and the importance of finality in family law litigation.

15On a motion to stay pending appeal, Justice Del Frate held in Webster v. Suteu, 2015 ONSC 7886 at paras. 14-17 that the applicant has the onus; there must be an analysis of the merits of the appeal (here, of the leave to appeal); and the motions judge can consider the findings of fact made by the trier of fact based on evidence before the trier of fact, and may consider any adverse findings of credibility made by the trier of fact.

16The arbitration award was based, in part, on findings of credibility and significant non-disclosure by Ian. The arbitrator made these findings about credibility and Ian’s non-disclosure (with reference to the paragraph numbers in his decision):

43In light of all these factors, I find that Mr. Gragtmans’ evidence lacks overall credibility.

44While his evidence is clear as a bell on certain points, he is vague or unresponsive on others. This lack of consistency is not only troubling but points to selective memory, fine-tuned on those issues in his interest to recall clearly while marginally or not responsive at all on the others.

45He was also argumentative, wanting to ensure his self-serving points were made but refusing in many instances to answer questions, deferring to knowledge his accountant(s) have but that he couldn’t acknowledge or affirm them. The evidentiary fly in this ointment is that I didn’t hear from either accountant.

46Further, although he disavowed this aptitude, citing his lack of higher education, to say Mr. Gragtmans is extremely astute financially – street-smart, if you will – is an understatement. His employment history and historical income, even fluctuating as it has done, demonstrates his business acumen and savvy.

51I also find the shielding of the Portland Adelaide transaction too conveniently timed to be anything but a subterfuge, designed specifically to ensure that, to the extent possible, Ms. Gragtmans remained unaware of, let alone benefited from it.

52This is completely contrary to Mr. Gragtmans’ disclosure and support obligations, both undoubtedly known to him. This, too, has led me to find Mr. Gragtmans lacking in credibility.

66I might add that I find the evidence recapped by Messrs. Niman in the section entitled “Ian’s Deceit” in Ms. Gragtmans’ Closing Submissions, not only telling but troubling.

67It has all the hallmarks of deliberate avoidance of relevant information and rather stark non-disclosure. At the very least, counsel ought not to have had to ferret out the nature, extent and timing of the Portland Adelaide transaction, a transaction that garnered Mr. Gragtmans approximately $8,000,000 in net proceeds of sale.

17Ian essentially argues that leave should be granted because the arbitrator made errors of law in failing to conduct a review before setting the amount of child and spousal support, and in determining Ian’s income for support purposes.

No Review – Child Support Suspended

18The Divorce Order provides that:

The quantum and duration, but not entitlement, of spousal support shall be subject to review on the earlier of the termination of child support and September 1, 2022 by mediation/arbitration by Stephen Grant…

19Ian raises as an error of law that child support terminated under the Divorce Order, since after graduating from high school, the youngest child took a “gap year.” He argues that the arbitrator was supposed to conduct a spousal support review rather than applying the existing 50/50 NDI formula when child support was reinstated after the gap year. The arbitrator found that child support was suspended, not “terminated”, in the gap year, and recommenced when the child started university. The arbitrator held at para. 128 of the award:

128As both parties agree Thomas is entitled to “summer” child support commencing September 1, 2019, I do not agree that a review under paragraph 9 [of the Divorce Order] has been triggered. Child support has only been suspended during Thomas’ “gap year”, not terminated.

129Accordingly, this is not a de novo hearing where I would be free to take an entirely fresh look at the situation. Here, I need not consider the plethora of factors to make a finding on appropriate amount and duration of support. I leave that to a review on the earlier of child support actually terminating or September 1, 2022, the date the parties anticipate would be the appropriate time for a fresh look at the parties’ financial and other circumstances.

20Whether or not leave would be granted on this issue is debatable. Many cases have found that a break in attending school for a “gap year” does not automatically terminate entitlement to child support under either the Family Law Act or the Divorce Act. Cases decided under the Divorce Act look at the actual financial reliance of the child on his or her parents during this gap year including earnings from employment. The actual period of suspension was between the end of high school and the beginning of first year university, when the child opted to work and travel for a year. The is a highly fact-specific analysis, and a weak, although not frivolous or vexatious argument.

Ian’s Imputed Income

21The other issues relate to alleged errors of law in calculating Ian’s income. Ian failed to produce an income report at the arbitration. The arbitrator was concerned with Ian’s failure to disclose income, finding at para. 66 that “It has all the hallmarks of deliberate avoidance of relevant information and rather stark non-disclosure. At the very least, counsel ought not have had to ferret out the nature, extent and timing of the Portland Adelaide transaction, a transaction that garnered Mr. Gragtmans approximately $8,000,000 in net proceeds of sale.”

22Further, in the Costs Award, the arbitrator held at para. 43 that “any complexity created arose from [Ian’s] failure to make fair and reasonable disclosure in a timely way, a “subterfuge” as I termed it in my award.” He held at para. 47 that Ian’s “actions led me to conclude that [he] intentionally concealed information to mislead [Marva] (and possibly me) as to her full financial entitlement.”

23It is in this context that Ian raises issues about the attribution of pre-tax corporate income, non-recurring income, and other issues. Much of the argument focused on the corporate goals of Ian’s real estate holding corporation, Canada Redevelopment Corporation (“CRC”), of which Ian is the 100% shareholder. CRC invests in real estate including single purpose real estate investment holding companies. CRC is Ian’s main investment vehicle for retirement. He argues that: “Throughout the marriage, and today, the purpose of CRC remains the same – to invest in real estate ventures with a view to reinvesting the proceeds of sale, building capital upon which to retire.” Much of his argument involves questioning how a spousal support obligation could interfere with the corporate objectives of CRC, and why he should be able to use his assets to fund his wholly owned corporation’s purpose—to amass assets for Ian’s retirement—rather than for spousal support purposes. This ignores the fundamental difference that while married, there may well have been a joint retirement goal but after separation, the shielding of assets through Ian’s wholly owned corporation for Ian’s sole use on retirement, to Marva’s detriment, deviates from Ian’s spousal support obligations. Ian explains the corporate goal is to build up capital to fund his retirement—a future capital base to which Marva has no direct legal entitlement.

24The arbitrator specifically addressed these issues, finding:

48My main difficulty in accepting his evidence is his insistence that as the operating mind of CRC, he could not draw on his corporate income because of the corporation’s business mandate or purpose.

49In fact, I find there is absolutely no constraint on Mr. Gragtman’s use of his corporate investment funds as he wishes except any constraint he chooses to impose on himself, which, in turn, occasions a corresponding detriment to Ms. Gragtmans. Although he professed otherwise, this is inescapably and unerringly known by Mr. Gragtmans, a serious evidentiary failing in my view.

50Mr. Gragtmans very deployment or redeployment of these funds as he may determine (and has determined) in his sole discretion, whether into real estate or tech ventures, demonstrates this lack of constraint. Whether these investments are consistent with the “corporate goals” is entirely irrelevant. What, in my view, is not open for him to do is try to shelter these gains under the corporate umbrella and pretend they aren’t available for spousal support purposes as that would consistently and easily defeat his financial obligations to Ms. Gragtmans under the Order.

54…I completely believe Mr. Gragtmans’ intention to acquire additional property for investment and capital growth to the extent possible as he (and Ms. Gragtmans) says was the parties’ goal during the marriage and, post-separation, Mr. Gragtmans’ goal in utilizing CRC and establishing subsidiary companies.

55The difference, of course, is that by doing this, Mr. Gragtmans is feathering his own nest, no longer the family’s, as apart from whatever income the investments or capital dispositions yield, Ms. Gragtmans shares in none of that growth, at least now, if ever. (emphasis added)

25Despite the lack of financial disclosure, the arbitrator based the award on the disclosure provided and “other evidence elicited or tendered” and determined Ian’s income for support purposes starting with his Line 150 income. He determined Ian’s income by applying sections 16, 17, 18 and 19 of the Federal Child Support Guidelines and relevant case law.

26The arbitrator declined to include the entire proceeds of a “unicorn” transaction as income, and instead attributed a 5% rate of return on CRC’s $8 million portion of the proceeds. Although Ian cites many payments made by CRC after the date the funds were received as part of the arbitrator’s error, what this reveals is that Ian chose to favour additional capital investments on his own behalf rather than saving money for the payment of spousal support obligations. While he now cites issues relating to income tax and other obligations, he does not point to errors by the arbitrator, nor the evidence before the arbitrator on these issues. He chose not to call his accountant at the arbitration, and not to produce an income report.

27The CRC financial statements were not before this court, nor were they before the arbitrator. Ian also adduces new financial evidence on this motion. In failing to make proper financial disclosure before the arbitrator, it appears that some of these problems were self-inflicted.

28The Court of Appeal for Ontario held that it is not an appellate court’s place to “re-find facts” that support the imputation of income. At the same time, the serious issue component of the test has a low threshold; the moving party must satisfy the court that the leave to appeal is not frivolous or vexatious. Given the very low threshold, I find on this stay motion that the leave to appeal is not frivolous or vexatious.

Irreparable Harm

29The burden of proving irreparable harm is on Ian. “Irreparable” refers to the nature of the harm, rather than its magnitude.

30Ian states in his affidavit: “I cannot make the payments ordered unless I liquidate the assets held by my corporation CRC. If I am required to do that, I will suffer irreparable harm and prejudice.” That said, Ian has provided no evidence that the only way he can make the payments is if he liquidates the assets held by his corporation, as he fails to address issues which arise on review of his Financial Statement. For example, he has a $2.5M condominium that has a $478,127 mortgage. He also has a TD personal line of credit with $0.00 owing. There is no evidence as to when and what accounts for the CIBC line of credit. There is no evidence other than a bald statement by Ian that he will suffer irreparable harm and prejudice if he liquidates assets held by his corporation. In Ian’s most recent Financial Statement which shows a net worth of $2.217 million, he states “Not Determined” as the “value” of his company CRC, which the evidence at arbitration established has significant assets. There is a $464,273 shareholder’s loan owing from CRC to Ian, and another $34,814 owed by a numbered company to Ian. Ian failed to address the use of any of these assets to meet his spousal support obligations.

31Ian also states in his affidavit: “I cannot simply liquidate assets held by CRC. In doing so, I would incur significant tax liability personally and jeopardize the company’s ability to carry on business. I cannot simply liquidate assets from PADI. I am an equal shareholder and cannot act unilaterally.” Ian provides no evidence about the “significant” tax liability he would incur if he liquidated CRC. On his Financial Statement under “Other Debts” he lists a “Contingent Tax Liability Re: CRC” and put simply puts “Not Determined”. Ian has not filed CRC’s income tax or financial statements on this motion. There is no evidence that as a 50% shareholder in PADI, he has asked that some of the millions in funds held by PADI be paid out as dividends or otherwise to the shareholders.

32Ian further states in his affidavit: “I cannot simply liquidate CRC’s investments without defeating CRC’s business purpose and jeopardizing the real estate ventures that CRC is developing. The real estate ventures are long term investments that cannot be easily liquidated.” I have discussed this at length above, setting out the arbitrator’s findings, with which I agree, that Ian is “feathering his own nest” by seeking to shelter all CRC assets, without considering his spousal support obligations. That something cannot be done “easily” does not amount to “irreparable harm”.

33Ian also states in his affidavit that if the award is not stayed he will be unable to meet his expenses. First, this does not amount to “irreparable harm. I note that Ian includes these expenses on his Financial Statement, some of which could be curtailed to make spousal support payments:

(a) $1,500 in meals outside the home per month ($18,000 annually);

(b) $1,700 per month in entertainment ($20,400 annually);

(c) $1,500 per month for vacations ($18,000 annually);

(d) $973 per month in boat expenses ($11,676 annually);

(e) $900 per month in clothing expenses ($10,800);

(f) $769 per month in Granite Club fees ($9,228 annually);

(g) $2,200 per month in household repairs and maintenance ($26,400 annually);

(h) $1,468 per month in car lease payments ($17,616 annually).

34Finally, following the arbitration, when Ian was aware of the extent of his obligations, Ian’s company loaned $500,000 to a company to invest in a real estate development. The investment contract was entered into in February 2019, shortly before the commencement of the arbitration, with no apparent thought as to the potential spousal support obligations.

35Ian has failed to establish that if a stay is not granted, he would lose the ability to seek leave to appeal. The only harm cited is financial, and the evidence does not establish irreparable financial harm.

Balance of Convenience

36This involving determining which of the two parties will suffer the greater harm from granting or refusing the stay pending a decision on the merits (here, the leave to appeal). As set out by the Court of Appeal in Heydari v. Ahmadi, 2018 ONCA 958, para. 35, the balance of convenience must consider the “no automatic stay” policy about support orders as expressed in Rule 63.01(1).

37Ian has significant income and capital. Marva argues that she will be significantly disadvantaged if Ian does not pay the support arrears and the level of support set out in the award. Marva remains financially dependent on Ian. The parties were married for 18 years. It was a traditional marriage. Marva was a stay-at-home mother, caring for the two children, while Ian focused on his career. Without appropriate support from Ian, Marva cannot meet her expenses. The arbitrator found that Marva “does not have the earning potential and power of [Ian]” and is “dependent for her financial security and well-being, on him, at least at present”. Since October 2019, Ian has been arbitrarily paying Marva $21,000 in spousal support about $12,000 net per month. With this amount of support along with the child support she is receiving ($4,093) she cannot meet expenses monthly. Marva bought a home in October 2019 and made a $100,000 down payment. Her evidence is that she was relying on the retroactive support owed to her by Ian to close the purchase of the home and to secure a mortgage. Ian lives alone in a $2.5M, 2,500 sq. foot luxury condominium. In contrast, Marva bought a $1.6M, 1,400 sq. foot home for her and the children which needs renovations.

38The balance of convenience favours declining to grant a stay.

Interests of Justice

39While the husband has satisfied the first component of the RJR test for a stay, he has not met the second and third branches dealing with irreparable harm and balance of convenience. Given the arbitrator’s findings about financial non-disclosure, the choice of the parties for a narrow appeal right which requires leave, the lack of evidence to meet the husband’s burden, and the “no automatic stay” policy in support order appeals, it is my view that the interests of justice will not be served by granting a stay of the award pending a decision on leave to appeal.

Order

40This court orders that Ian’s motion is dismissed, with costs, and the award is not stayed pending Ian’s seeking leave to appeal.