Court File and Parties

Newmarket Court File No.: FC-18-55360-00 Date: 2020-04-28 Ontario Superior Court of Justice

Between: Chuxin Chen, Applicant And: Zhenxu Jin, Respondent

Counsel: Marcy Segal, for the Applicant Omer Chaudhry, for the Respondent

Heard: April 27, 2020

Ruling on Urgent Motion

Jarvis J.

[1] On April 15, 2020 I granted the request of the respondent (“the husband”) for leave to hear an urgent motion dealing with the forthcoming sale of the parties’ matrimonial home, a transaction that is scheduled to be completed on May 1, 2020. Directions and filing deadlines were given. It was specifically directed that no other motion would be entertained. The applicant (“the wife”) disregarded that direction: she brought a motion for leave that dealt with the same subject matter as the husband had requested and added requests for relief involving her financial security. I was prepared to deal with that motion because the issues in that overlapped those in the husband’s motion.

[2] The motion was held by teleconference. The parties audited.

Background

[3] The parties were married on December 12, 2013 and separated on December 30, 2017. The wife resides in the jointly-owned matrimonial home with the parties’ two very young children (ages five and four). After these proceedings began the parties agreed to mediate, they retained a mediator and, at some point during that process, converted it to mediation/arbitration. An agreement to that effect was signed on June 6, 2018.

[4] The wife brought a motion before the arbitrator for interim relief and an award was made on June 15, 2018. The award dealt with disclosure from the husband, questioning, preservation of assets and spousal support. [^1] The arbitrator observed that the litigation “has been highly acrimonious, aggressive and divisive”. [^2] Of relevance to the issues now before this court was an undertaking given by the husband acknowledging that he would be solely responsible for $134,000 that he withdrew from a line of credit after the parties separated. Although the evidence is unclear, it seems that the line of credit was registered as a second encumbrance on title to the matrimonial home.

[5] On October 24, 2018 the arbitrator discontinued the arbitration process and his engagement because the parties could not agree to include the jurisdiction to address matters on a final basis. The award made on June 15, 2018 has never been made into an Order of the court despite the wife’s efforts: the husband changed lawyers after the arbitrator withdrew and Mr. Chaudhry has been unwilling to approve a draft Order apparently prepared by his predecessor dealing with matters for which he was not retained. On December 26, 2019 the wife brought a motion to have the award made into an Order of the court. On December 31, 2019 Bennett J. dismissed the motion (this endorsement does not appear to have ever been sent to the parties by court administration: the parties were unaware of it when their motions were argued - a copy of that endorsement will be sent to the parties with this ruling).

[6] The wife insisted that the husband pay the line of credit. The evidence is clear that since shortly after she had discovered that the husband had withdrawn the funds in issue the wife had repeatedly demanded that the debt be paid: almost as frequently the husband responded that there was more than sufficient equity in the home from which the line of credit could be repaid from his share of the net sale proceeds. Besides, he was substantially indebted and didn’t have the means. Although not directly relevant to the issue now before this court, the wife contends that she did not agree to open, or sign for, the line of credit and that the husband forged her signature, an allegation he disputes despite text exchanges between the parties which are suspicious, but not confirmatory, of the wife’s allegation.

[7] In December 2018 the husband consented to a support Order that attributed to him a $400,000 income and required him to pay $4,862 for child support and $7,079 for spousal support monthly. The parties also agreed to list the matrimonial home for sale. A term of the December 2018 Order was that the wife would pay the household expenses from the support paid.

[8] The husband has been in default of the support Order since February 15, 2019: the support arrears total $125,506.71 as of April 27, 2020. [^3] The husband’s position is that he has overpaid support: the arrears should be less than as reflected by the Family Responsibility Office (“FRO”) records because he provided funds to the wife or paid expenses for the home outside of the FRO in 2018 and 2019. When the husband didn’t comply with the support Order, the wife had no ability to pay the property’s expenses and so, after several mortgage payment deferrals (the last of which was orchestrated by the husband without the wife’s knowledge) the first mortgage went into default as of October 2019. Nothing has been paid since. On or about March 3, 2020 the first mortgagee on the matrimonial home started Power of Sale proceedings. On March 17, 2020 the parties signed an Agreement of Purchase and Sale having a May 1, 2020 closing date. The first mortgagee has agreed to stay its action until the sale closes.

Decision

[9] It is common ground that, based on calculations from the real estate solicitor acting for the parties, the net proceeds of sale should be around $245,000 before paying the line of credit. [^4] The issue for the court is the parties’ dispute whether the line of credit should be paid from the gross proceeds of sale. Frankly, I cannot see how the sale transaction can be completed without that happening. While the wife points to the husband having other property interests that he could encumber to provide him with the funds needed to pay the line before May 1, he disputes that allegation: the April 13, 2020 financial statement that he filed appears to support his inability to pay.

[10] While the wife would prefer an Order requiring the husband to repay the line of credit before the closing date of the sale, she confirmed that she would sign the documents required by the solicitor regardless of the court’s ruling. In that event she asked that the balance of the proceeds of sale after payment of the line of credit be paid to her on a without prejudice basis. The husband prefers that the net sale proceeds be equally divided between, and paid to, the parties or that they be held in trust. When pressed by the court about an equalization payment range and the likely payor, Mr. Chaudhry advised that it was impossible to estimate. Ms. Segal estimated that, as a minimum, the husband owed the wife not less than $350,000. A rough overview of the parties’ finances suggests that the husband will owe an equalization payment to the wife but its amount, even a range, is unclear and even then there could be post-separation adjustments applied to the amount ultimately payable.

[11] In my view, the line of credit should be paid from the closing funds before any distribution to the parties and the balance remaining paid to the wife on a without prejudice basis for these reasons: (a) After the first Order was made in this case in February 2018, the husband sold a property and diverted its net sale proceeds of $146,000 to a line of credit on another property in which he has disclaimed any ownership interest. The arbitrator agreed with the wife that she had every reason the question the veracity of the husband’s actions and explanations. [^5] The funds from that sale should form part of the husband’s net family property but if his most recent financial statement is to be believed he is insolvent; (b) The husband has been more in breach of, than compliant with, the support Orders made in these proceedings. The FRO reports that the support arrears exceed $125,000. I have no doubt that should anything be paid to the husband that the wife’s claim to, and hope of recovering anything as and for, an equalization payment will be severely prejudiced; (c) The husband would be the best person to know what he earns. He agreed in December 2018 to have a $400,000 income imputed to him (presumably for 2018 and going forward) but then produced in February 2020 an income analysis that suggested that his income was really $224,372 for that year and $166,209 for 2019. In her endorsement made on September 30, 2019 McGee J. noted that her quick review of the proposed expert’s income report indicated that its author had misapplied the husband’s claimed Schedule III adjustments by as much as $80,235 and that, referring to a July 29, 2019 endorsement made by Kaufman J. that referenced a different income, this was one of several “evidentiary curiosities” about the husband’s income. Even the arbitrator was unimpressed with the husband’s financial probity; (d) The husband does not appear to have made any effort to honour the unequivocal undertaking given to the wife except by payment of the line of credit from his presumptive share of the net sale proceeds. There is no reason why the wife should not be entitled to, at the very least, her share of the net proceeds and no reason why, given the substantial support arrears owing, money should flow to him or be held in trust.

[12] Accordingly, the following is ordered: (a) The line of credit shall be paid from the gross proceeds of sale of the matrimonial home; (b) The net proceeds of sale after accounting for payment of the first mortgage, line of credit, solicitor’s fees and expenses related to the sale shall be paid to the wife; (c) The payment of the line of credit and the payment to the wife shall be without prejudice to the rights and claims of the parties in this proceeding; (d) The parties shall sign all documents required by the real estate solicitor to complete the sale transaction as the solicitor deems are relevant and necessary; (e) Save and except for costs, the remaining requests made by each party in their motion are dismissed.

[13] In the event that the parties are unable to resolve costs by May 8, 2020, the following shall apply: (a) The wife shall deliver her submissions by May 14, 2020 (4:00 p.m.); (b) The husband shall deliver his submissions by May 28, 2020 (4:00 p.m.); (c) Reply (if any) by the wife to be delivered by June 4, 2020 (4:00 p.m.); (d) All submissions shall be double-spaced and no longer than five pages for (a) and (b) above and three pages for (c); (e) The parties’ submissions shall be filed as part of the Continuing Record by the parties once the court re-opens: (f) The submissions and any Offers to Settle, Bills of Costs and authorities upon which a party may wish to rely shall be emailed to the judicial secretary (Meghan.Billings@ontario.ca). Only the submissions shall form part of the Record.

[14] In the circumstances of the COVID-19 emergency, this Order is operative and enforceable forthwith without any need for a signed or entered, formal, typed Order. Approval is dispensed with: the parties may submit a formal Order for signing and entry once the court re-opens.

Justice David A. Jarvis Date: April 28, 2020

Footnotes

[^1]: The Mediation/Arbitration Agreement did not include child support. [^2]: Paragraph 13 of the agreement. [^3]: Following argument, I asked the wife to provide as accurate a figure as possible for the support arrears as calculated by the FRO. She provided her lawyer’s affidavit from which the arrears figure was taken. [^4]: This evidence became available after the parties filed their material. The parties agreed to have Mr. Chaudhry provide to the court written information in their lawyers’ possession from the solicitor dealing with the closing and proposed distribution of funds. [^5]: Paragraph 38 of the June 15, 2018 arbitrator’s Award.