COURT FILE NO.: FC-20-55490
DATE: 2022-06-30
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Sharon Hutton
Applicant
– and –
James Albert Hutton
Respondent
Harold Niman / Chloe van Wirdum, for the Applicant
Aaron Franks / Stephanie Romano, for the Respondent
HEARD: May 12 and 19, 2022
the honourable mister justice M.j. Valente
decision on motion
[1] The Applicant brings this motion pursuant to the Divorce Act, R.S.C. 1985, c. 3, as amended, for interim, without prejudice, child support and spousal support together with retroactive lump sum child support and spousal support from April 2019 to date. In the same motion, the Applicant seeks pursuant to the Family Law Act, R.S.O. 1990, c. F.3, as amended, an order for the sale of the former matrimonial home located at 6547 Wellington Road 34, Cambridge, Ontario (the ‘Matrimonial Home’).
Background Facts
[2] The parties were married in 1995 and separated in 2019; theirs was a 23-year marriage. They have four children: twins, Andrew and Zachary, who are 23 years of age, Benjamin, aged 20, and Meredith who is 17 years old. Andrew and Zachary work full time at Hutton Forest Products Inc. (‘Forest Products’), a lumber brokerage business that the Applicant, Sharon Hutton (‘Sharon’) and the Respondent, James Albert Hutton (‘James’) started in 2005. Benjamin is in university and Meredith is completing grade 12.
[3] The Matrimonial Home is jointly owned by James and Sharon.
[4] James has lived in the Matrimonial Home since separation. Zachary and his fiancé live in a secondary building located on the Matrimonial Home property and plan to be married on the property this summer. There is dispute in the materials as to whether Andrew lives exclusively with his girlfriend or divides his time between the Matrimonial Home and his girlfriend’s home.
[5] Sharon has lived in several rental properties since separation together with Meredith. Benjamin lives with his mother and sister during the summer months and vacation times and routinely returns home from university during the week (the ‘Summer Schedule’).
[6] James is 50 years of age. He is the president and chief executive officer of Forest Products. James is a recovering alcoholic. To his credit, James has been sober for well over one year.
[7] Sharon is 49 years of age. She is university educated. Prior to the birth of the twins, Sharon worked from several years in sales but has not worked outside the home and Forest Products since 1998 until recently. Sharon currently works part-time for a not-for-profit and is in the process of completing her real estate license.
The Roles of Sharon and James at Home and Forest Products
[8] It is Sharon’s evidence that she and James agreed in 1998 that she would leave the paid work force to raise the children and manage the house. Although Sharon admits to having the assistance of a nanny for a brief 6-month period and the regular assistance of a housekeeper, it is her position that certainly by the time all 4 children were born, most of her time was consumed with attending to the children and running the house.
[9] Sharon also attests that until separation, she always worked at Forest Products but on her own admission, once all 4 children were born, her hours were reduced to part-time.
[10] Sharon states that throughout her years at Forest Products, her responsibilities included accounting, marketing, completing purchase orders and managing the office whereas in the final years of her employment with Forest Products, she focused on employee and premises related issues.
[11] It is Sharon’s position, and with her agreement, James spent the majority of his time in growing Forest Products into the successful enterprise that it is today.
[12] For his part, James takes issue with Sharon’s description of her role with the children and Forest Products. Although he concedes that she was “more available to the children” than he, James states that they were a parenting team; each involved in the children’s lives, and he, in particular, was primarily responsible for all of the children’s extracurricular activities. James also states that not only did Sharon have a minimal role in Forest Products, but she was completely disinterested in the business, preferring instead to spend her time at yoga, spa hopping and socializing with friends. At best, according to James, by 2010 Sharon became involved in such projects as small human resource tasks, locating new office space and researching group benefits.
[13] Certain of James’ emails to Sharon belie his minimization of her role at home and office. For example, in his email of September 26, 2015, James states:
“Babe, As I was typing some thank you emails to staff, I wanted to acknowledge you the MOST. You have taken on MORE than I thought possible at the office AND juggled our home at the same time. I am TRULY amazed and grateful for everything that you have been doing! I know that it is spreading you thin, so I am totally fine if you need to back off at the office a bit. Our home and kids are a HUGE project and the most important, so don’t feel that you have to come in every day for me”
[14] Notwithstanding that I do not have the benefit of cross-examination transcript on this motion, I have no difficulty finding on the record before me that Sharon was the primary caregiver of the children and made a valuable and substantial contribution to Forest Products from its incorporation in 2005 until her termination upon separation. This finding does not diminish James’ contribution to the lives of the children; I have little doubt he contributed to the extent that he could given the time commitments of a fledgling business that he made into a multimillion-dollar revenue enterprise.
The Lifestyle of Sharon and James
[15] Sharon describes her former lifestyle with James as lavish. According to Sharon, the Matrimonial Home is luxurious. In addition, for some time the family enjoyed two vacation properties, one in Naples, Florida and a second in Parry Sound, Ontario, both of which were the subject of extensive renovations after their purchase. It is also Sharon’s evidence that the children attended private schools and the family vacationed often to such destinations as the Caribbean, California and Europe. Both she and James drove expensive cars, the older children were gifted cars at a certain age, and generally, money was not an issue for the family unit. Sharon, herself, spent liberally on her own health and wellness, including regular massages, Reiki treatments, cupping treatments and yoga classes.
[16] While James stresses that “in the beginning”, the family struggled to meet their needs, denies that the children were educated exclusively at private schools, describes the Ontario cottage as a log cabin and the family’s vacation destinations as being more pedestrian than exotic, James’ evidence does not dissuade me from concluding that the family had, at a minimum, a very comfortable upper middle-class lifestyle.
[17] It was a lifestyle funded by a gross income of in excess of $2.6 million in 2017 to over $2.5 million in the year of separation. The Matrimonial Home sits on some 61 acres. It is 12,000 square feet and has outbuildings and 2 salt-water pools. It may be worth as much as $7 million but certainly no less than $4 million based on the evidence of the parties. It is encumbered with a mortgage of less than $1.5 million. From December 2010 to December 2018, the family went on no less than 32 vacations. No expense was spared in renovating the family’s Ontario cottage: local sand was not sufficient to replenish the shoreline; only imported sand from Bermuda would do. If the couple’s lifestyle was not “lavish” as Sharon describes, it was one that is enjoyed by an extremely small elite percentage of Canadian society.
The December 2008 Shareholder Agreement
[18] When Forest Products was incorporated in 2005, James received 51 percent of the common shares and Sharon received the remaining 49 percent.
[19] In 2008, it is James’ position that he and Sharon began to have serious issues in their marriage to such an extent that Sharon was considering ending the marriage.
[20] On December 29, 2008, the parties signed a Shareholder Agreement (the ‘2008 Shareholder Agreement’). James explains in his affidavit that the Shareholder Agreement originated from a “customer/supplier request” and because both he and Sharon – but mostly Sharon – wanted certainty with respect to their respective interests in Forest Products should their marriage end.
[21] The 2008 Shareholder Agreement provided that if the parties separated, Sharon would be required to sell her shares back to the corporation or to James at the lesser of the fair market value at the time of sale or their value as at June 30, 2008. It is James’ position that Sharon was comfortable with the forced sale on separation because she had the assurance of money for her interest in Forest Products.
[22] For her part, Sharon’s evidence is that she did not know why in late 2008 James approached her to sign the Shareholder Agreement. Because James always got angry and became threatening when questioned, Sharon signed the 2008 Agreement without scrutiny.
[23] Sharon now appreciates were the 2008 Shareholder Agreement the prevailing agreement with respect to her interest in Forest Products, she would be required to sell her shares for $287, 037, being 49 percent of the value of the shares of the corporation as at June 30, 2008 or less if the value decreased.
The January 2013 Marriage Contract and Amending Shareholder Agreement (collectively, the ‘Marriage Contract’)
[24] Just as James and Sharon have different versions of the origin of the 2008 Shareholder Agreement, so too does their evidence differ with respect to the genesis of the Marriage Contract.
[25] James’ evidence is that the Marriage Contract was executed 18 years into the marriage at the insistence of Sharon. In 2012, James and Sharon were considering separation. Sharon was concerned that James would “run the company into the ground” because of his addiction issues, resulting in no payment under the 2008 Shareholder Agreement. Sharon told James that she no longer wanted to be involved in the business and wanted to renegotiate the 2008 Shareholder Agreement to crystallize the value of her interest before James “could ruin everything”.
[26] To achieve Sharon’s goal, Forest Products’ lawyers and accountants proposed an estate freeze whereby each of the parties received fixed-value preference shares to ensure that Sharon was not tied to the future growth or decline in value of the company and the Forest Products’ common shares were transferred to a family trust. This new corporate structure required the 2008 Shareholder Agreement to be amended and the Marriage Contract to be drafted. According to James, both documents were required to insulate Sharon from what Sharon assumed would be the future decline of Forest Products.
[27] Sharon, on the other hand, denies that the marriage was at a breaking point in 2012 and disputes that she no longer wanted to work in the business. She also disputes that the corporate restructuring was due to her desire to insulate herself form a potentially failing business enterprise.
[28] She explains that James advised her in January 2013 that he wanted to restructure Forest Products pursuant to which they would each receive fixed value shares in the company through a new holding company and the growth shares of the business would be held by a newly formed family trust. According to James, the proposed restructuring was required for tax planning and creditor proofing purposes as well as to protect Forest Products’ retained earnings.
[29] It is Sharon’s evidence that there was no mention of a marriage contract as a part of the restructuring by James, or anyone else, until January 29, 2013, when the Marriage Contract was signed by her.
[30] At this stage of the proceeding, it is impossible for me to determine whose version of the origin of the Marriage Contract I accept. All I know with any level of certainty is that Sharon continued to work at Forest Products after January 2013.
Events Immediately preceding the Execution of the Marriage Contract
[31] There is also very little, if any, agreement as between Sharon and James respecting the sequence of events that lead to Sharon’s execution of the Marriage Contact.
[32] Sharon’s evidence is as follows:
• Lawyer, James McIlhargey (McIlhargey), was selected by James or his legal/accounting team to provide her with advice respecting the Marriage Contract.
• Prior to January 29, 2013, she had never contacted or heard of McIlhargey.
• Prior to her meeting with McIlhargey on January 29, 2013, Sharon did not receive a copy of the draft Marriage Contract and disclosure documents, including James’ financial statement, that had been provided to James by his family law lawyer to deliver to her.
• Prior to Sharon’s January 29, 2013, meeting with McIlhargey, Sharon did not receive a copy of the letter from corporate counsel to McIlhargey confirming Sharon’s appointment with him on January 29, 2013 to review the Marriage Contact. Like the draft Marriage Contract and enclosures, a copy of the letter confirming the meeting was given to James on the understanding it would be delivered to Sharon.
• On January 29, 2013, Sharon first met with Forest Products’ corporate counsel, Shawn Lynn (‘Lynn’) together with James. At the meeting, the three discussed the tax savings and legal protection the restructuring would provide and signed various documents relative to the restructuring. There was no mention of a Marriage Contract.
• At the conclusion of the meeting with Lynn, Sharon was directed by both he and James to go across the street to meet with McIlhargey who was to provide her with legal advice.
• McIlhargey advised Sharon that he had been engaged by James to provide her advice with respect to the Marriage Contract.
• Sharon was confused, upset, scared of James’ reaction if she refused to sign the document. She cried. Without understanding the significance of the Marriage Contract, she signed it.
• After she had signed the Marriage Contract, and questioned James about it, he became angry and accused Sharon of being disloyal.
[33] James’ evidence stands in contrast to that of Sharon’s version of events. In her reply affidavit, Sharon denies the events as particularized by James without providing additional factual detail other than reference to an exchange of emails in 2012 in which they each express their love for each other.
[34] James’ evidence is as follows:
a) He and Sharon discussed the concept of a corporate reorganization and marriage contract over several months prior to January 29, 2013.
b) Sharon resisted retaining her own lawyer to provide her with advice regarding the Marriage Contract; all she wanted was a fixed value for her interest in Forest Products. Only after James insisted that she have her own lawyer did she retain McIlhargey.
c) Sharon never met with corporate counsel, Lynn, on January 29, 2013.
d) On January 24, 2013, James’ family law counsel provided to both McIlhargey and James copies of the draft Marriage Contract and a disclosure brief, including but not limited to, a sworn financial statement documenting a net worth of approximately $3.5 million and total income from all sources for 2012 in the approximate sum of $517,000; a summary of James’ 2012 personal income; copies of James’ personal returns and notices of assessment for the 2009 to 2011 income tax years; Forest Products’ financial statements for year ends 2010 to 2012; and two explanatory letters from the corporate accountants detailing how the value of the parties’ respective interests in Forest Products was calculated and their expected incomes from 2012 and 2013 (collectively, the ‘Marriage Contract Package’).
e) On January 24, 2013, James personally provided the Marriage Contract Package to Sharon.
f) On January 24, 2013, corporate counsel, Lynn, provided to both James and McIlhargey a package of corporate documents, including the 2008 Shareholder Agreement, the draft trust deed and the corporate reorganization documents (the ‘Corporate Document Package’).
g) James provided the Corporate Document Package to Sharon together with the Marriage Contract Package.
h) Sharon reviewed the Marriage Contract Package and Corporate Document Package over the weekend prior to her meeting with McIlhargey on January 29, 2013.
i) At no time did Sharon, or McIlhargey, request further disclosure.
j) On January 30, 2013, McIlhargey sent a letter to Lynn confirming that Sharon had signed the corporate reorganization documents and Marriage Contract in his presence on January 29, 2013.
k) Sharon was under no time deadline or pressure to sign any of the documents, including the Marriage Contract, when she attended McIlhargey’s office on January 29, 2013.
l) Pursuant to the terms of the Marriage Contract, Sharon confirmed she has received full and complete disclosure, had the benefit of independent legal advice, understood the Marriage Contract and signed it voluntarily.
The Impact of the Marriage Contract
[35] For purposes of this motion, the salient terms of the Marriage Contract are as follows:
a) The parties froze the value of their respective interests in the corporation and received fixed-value preference shares.
b) The value was fixed at the shares fair market value as determined by the corporation’s accountants. The value of Sharon’s shares was fixed at $750, 004.90.
c) The common shares of the corporation which would capture the future growth were gifted to a family trust. Sharon was not one of the discretionary beneficiaries of the family trust.
d) Upon separation, Sharon’s fixed value preference shares are to be redeemed for the gross sum of $750, 004.90 in exchange for Sharon’s resignation as an officer, director and employee of Forest Products and unilateral release of any claim to the family trust and James’ interest in any business enterprise that he may have as at the date of separation.
e) In consideration of a lump sum payment of $100,000, Sharon waive her spousal support claim.
[36] In 2016 there was a further restructuring of the corporation, but this restructuring did not affect Sharon’s interest in any substantive way.
[37] The business shares were valued at $15.8 million and $11 million in 2018 and 2019 respectively.
[38] Sharon’s preference shares were redeemed in November 2019 at their stipulated value less the funds she took from the corporate account and the personal expenses charged to the corporate account.
[39] A few months later, in January 2020, James paid Sharon the lump sum spousal support payment of $100,000.
Preliminary issue
[40] Before addressing the substantive issues of this motion, I will address a preliminary procedural issue upon which I ruled during the hearing of the motion.
[41] Following the delivery of Sharon’s reply affidavit in January 2022, James delivered two sur-reply affidavits: the affidavit of Rebecca Hipple (‘Hipple’), sworn April 11, 2022, and his own affidavit, sworn April 21, 2022 (collectively ‘the Sur-Reply Affidavits’). Hipple is a former employee of Hutton Forest Products.
[42] Counsel for Sharon objected to the filing of the Sur-Reply Affidavits and sought to strike them from the record. Counsel for Sharon relies on Rule 14 of the Family Law Rules, O. Reg. 114/99, as amended, which makes no provision for sur-reply by the responding party and the recent decision of Justice Bruhn who struck a sur-reply affidavit from the record, stating:
… it is contrary to the primary objective for parties and counsel to file excessive material as this requires the Court to spend extra resources, if only, in dealing with the issues of whether those extra materials should be considered, rather than spending those resources on another case. Parties do not get more of the Court’s time, simply by piling on material (Sloss v. Liscoumb, 2022 ONSC 1396 at para 23)
[43] James’ counsel argued that I should exercise my discretion and allow the Sur-Reply Affidavits into evidence because the affidavits, with one exception, speak to events that occurred after the delivery of Sharon’s reply affidavit and this Court is entitled to have the most recent information before it. Counsel also argued that the affidavits are relevant because they address Sharon’s conduct which is a factor for my determination as to whether the Matrimonial Home should be sold.
[44] While I agree with the comments of Justice Bruhn and further agree that the delivery of sur-reply affidavits should be discouraged, I exercised my discretion in this instance to permit the Sur-Reply Affidavits into evidence because they do bring the Court current with respect to certain events subsequent to January 2022 and they are relevant for this Court’s consideration in assessing Sharon’s conduct in bringing the application for the sale of the matrimonial Home. I also note that the Sur-Reply Affidavits are otherwise brief in length.
Is the Marriage Contract a Bar to Sharon Receiving Interim Spousal Support
[45] In determining Sharon’s entitlement to interim spousal support, this Court must first consider whether the Marriage Contract is a bar to the relief sought?
[46] The Court of Appeal has made it clear that courts should strive to uphold domestic contracts. Courts should treat the parties’ reasonable best efforts to deal with their affairs as reflected in an agreement as presumptively dispositive. This is particularly so where the agreement at issue was negotiated with independent legal advice (see Dougherty v. Dougherty, 2008 ONCA 302, paras 9-10; Butty v. Butty, 2009 ONCA 852 at para 50).
[47] Notwithstanding the direction of the Court of Appeal, Justice Fryer notes in Balsmeier v Balsmeier that
.. there are still too many cases brought before the court wherein one party attempts to set aside an otherwise valid contract in the hopes of shaking loose a more favourable resolution from the wealthier party (2016 ONSC 3485, at para 37).
[48] Having said that, as noted by Justice Monahan in her recent 2021 decision in Gordon v. Zuckerman,
Interim support pursuant to the Divorce Act is not necessarily barred by the waiver of spousal support in an agreement if, on the evidence filed on the motion for temporary support, there is a triable issue as to the enforceability of the waiver. This is particularly the case in circumstances where, if the enforceability of the contract were to be upheld at trial there are assets in the recipient’s name that can be used to compensate the payor for any overpayment of support (2021 ONSC 4576 at para. 19).
[49] In their argument both counsel for Sharon and James agree that in order for Sharon to be awarded temporary spousal support in the face of the Marriage Contract, she must address the two-stage analysis stipulated by the Supreme Court of Canada in Miglin v Miglin, 2003 SCC 24, [2003] 1 SCR 303.[^1]
[50] In Gordon, Justice Monahan succinctly describes the two stage Miglin analysis as follows:
Stage one requires a consideration of the circumstances in which the agreement was negotiated and executed, in order to determine whether there is any reason to discount it on that basis. This first stage also considers the substance of the agreement to determine whether its terms are in substantial compliance with the objectives of the Divorce Act.
Assuming the contract satisfies the analysis at stage one, stage two of the Miglin test considers the current circumstances of the parties to determine whether the agreement still reflects their original intentions, as well as the extent to which the agreement is still in substantial compliance with the objectives of the Divorce Act (at para. 21).
[51] Where counsel for Sharon and James disagree, however, is the appropriate burden that Sharon must meet before an award of interim spousal support is to be granted.
[52] Counsel for Sharon submits that she need only demonstrate on this interim motion that there is triable issue respecting:
a) the circumstances in which the agreement was negotiated and executed;
b) whether the Marriage Contract is in substantial compliance with the Divorce Act; or
c) whether the agreement still reflects the original intentions of the parties and the extent to which it is still in substantial compliance with the objectives of the Divorce Act.
[53] In support of his submission, counsel relies on the decisions of this Court including Chaitas v. Christopoulos, 2004 CanLII 66352, LaFrance v. Charbonneau, 2011 ONSC 6462, Pate v. Pate, 2015 ONSC 2024, Schulman v. Ganz, 2015 ONSC 3254 and Gordon v. Zuckerman. In all of these decisions the Court found that the contract between the parties did not constitute a bar to an order for temporary spousal support pending trial on the basis of a triable issue as to the enforceability of the limitation on spousal support.
[54] On the other hand, James’ counsel argues that if the two-stage analysis as set out in Miglin is to have any meaning and the direction of this province’s Court of Appeal regarding the presumptively dispositive nature of agreements is to be respected, Sharon’s burden must be significantly greater than the establishment of a triable issue.
[55] Counsel relies on the 2005 decision of this Court in Jones v. Murray in which Justice Wood found that interim relief should be granted in the face of a separation agreement only where the moving party can successfully demonstrate:
a) a substantial likelihood of success at trail with respect to one or more of the factors stipulated in the Miglin two stage analysis;
b) that the failure to grant interim relief will cause irreparable harm to the party seeking the relief; and
c) that granting the relief will not cause harm to the other party which cannot be compensated (2005 CanLII 23318 at paras 9-10).
[56] Counsel for James did not, however, direct me to any subsequent decision that imposed the “substantial likelihood of success” test where interim spousal or child support (as in the case of Jones) was sought in the face of a contract limiting support.
[57] For this reason, I am not prepared to require that Sharon demonstrate a substantial likelihood that she can meet the Miglin test at trial. I prefer to follow the “triable issue” test imposed in Chaitas and consistently followed since 2004 and as recently as last year by Justice Monahan in Gordon.
[58] Having said that, I do note that in each of the above referenced decisions where the Court applied the “triable issue” test, the Court found there was a triable issue of some significance. In both Chaitas and Gordon, for example, Justices Sachs and Monahan specifically found that there was a “serious issue” as to whether the limitation on spousal support should be set aside on the basis of the Miglin analysis (see Chaitas at para 25 and Gordon at para 30). Therefore, I am of the view that not any triable issue will open the door for interim relief to be granted in the face of an agreement limiting support but rather interim relief is to be granted in those circumstances only where there is a significant or serious issue as to whether the agreement would pass the Miglin test.
[59] Based on the untested record before me, I am not satisfied that the circumstances in which the agreement was negotiated and executed raise a serious issue as to whether the Marriage Contract should be discounted. I have reached this conclusion for the following, among other, reasons:
a) McIlhargey provided Sharon with legal advice respecting the Marriage Contract;
b) Disclosure was provided at least to McIlhargey;
c) There was no request for further disclosure from either McIlhargey or Sharon;
d) There was no rush to sign the Marriage Contract; and
e) Although there is some evidence that Sharon was afraid of James’ reaction if she refused to sign the Marriage Contract, there is no evidence of duress.
[60] The analysis does not, however, end there. Both stages of the Miglin analysis require this Court to assess the extent to which the Marriage Contract took into account the factors and objectives of the Divorce Act at the time the agreement was executed and the extent to which it is still in substantial compliance with the objectives of the Divorce Act.
[61] The factors and objectives set out in the Divorce Act for this Court to consider are the same whether or not the Court is making an interim or final order.
[62] Pursuant to s. 15.2 of the Divorce Act, the existence of the Marriage Contract and its waiver of spousal support is only one of the factors to be considered in making an order for spousal support and in considering the condition, means and needs and other circumstances of each spouse.
[63] The result of the Marriage Contract is that after 23 years of marriage and a $100,000 lump sum spousal support payment, Sharon is not entitled to additional spousal support, notwithstanding her contributions to the marriage both in the family home with the parties four children and at Forest Products working with James.
[64] During the course of the marriage, Sharon gave up her employment in sales to focus on managing the household, raising the children and assisting James, to the extent that she was able, at Forest Products. Sharon has not worked outside of the home and Forest Products since 1998. Sharon’s sole source of income became Forest Products, a business that James took over pursuant to the terms of the Marriage Contract. At the end of the day, Sharon was left without the income stream she had earned in sales prior 1998, and more significantly, the income she enjoyed from the successful Forest Products enterprise.
[65] On the other hand, pursuant to the terms of the Marriage Contract, James has retained the profitable Forest Products business and continues to enjoy the income that it generates.
[66] I am not satisfied that this result, sanctioned by the Marriage Contract, recognizes “the economic advantages or disadvantages to the spouses arising from the marriage or its breakdown.” Nor am I satisfied that the current situation relieves “any economic hardship of the spouses arising from the breakdown of the marriage.” I am also of the opinion that the Marriage Contract fails to promote “the economic self-sufficiency of each spouse” in the circumstances of these parties where Sharon is pursuing her real estate license to earn an alternate source of income in the place of her current part-time employment at a not-for-profit.
[67] As Justice Sachs noted in Chaitas, the above noted considerations are all objectives of the Divorce Act that the Court must consider on a motion for interim support. Accordingly, it is my opinion there is a serious issue as to whether the Marriage Contract is in substantial compliance with the objectives of the Divorce Act.
[68] Furthermore, even if I were to accept James’ disputed evidence that the Marriage Contract was signed at the insistence of Sharon who wished to crystalize the value of her interest in Forest Products, and accept James’ position that the Marriage Contract currently reflects the parties’ original intentions, I have no evidence before me respecting the original intentions of Sharon and James respecting the spousal support limitation. I therefore also find that there is a serious issue as to the parties’ original intentions respecting spousal support and whether the Marriage Contract still reflects those intentions today.
[69] While the Marriage Contract may indeed achieve the Divorce Act objective of bringing certainty, finality and autonomy to the parties on separation, in my opinion, this is the only objective the Marriage Contract achieved and this is only one of several objectives the Court is to consider.
[70] For all the above reasons, I find that the Marriage Contract is not a bar to Sharon receiving interim spousal support.
Quantum of Interim Support
[71] I agree with Justice Lemon who in Driscoll v. Driscoll (2009 CanLII 66373 (ON SC), [2009] OJ No 5056 (QL) at para. 14) found that the Court does not engage in an in-depth analysis of the parties’ circumstances on an interim spousal support motion. It is “rough justice at best.” In Driscoll, Justice Lemon enumerated a number of principles for the Court’s consideration, including the following:
• on motions for interim support, the applicant’s needs and the respondent’s ability to pay assume greater significance;
• an interim support order should be sufficient to allow the applicant to continue living at the same standard of living enjoyed prior to separation if the payor’s ability to pay warrants it; and
• on motions for interim support, the Court does not embark on an in-depth analysis of the parties’ circumstances which is better left to trial.
[72] Sharon seeks interim spousal support in the gross amount of $27,916 per month and interim child support in the amount of $9,918 per month. She seeks these amounts based on James’ gross annual 2020 income of $1,100,000. The proposed spousal support payment is the mid-range amount stipulated by the Spousal Support Advisory Guidelines (assuming Sharon’s 2020 reported income) and the child support payment is that prescribed by the Federal Child Support Guidelines.
[73] James’ 2021 income and his current income are not in evidence. The best evidence the Court has respecting James’ income is found in the White and Lewis Income Report, dated March 31, 2021 (the ‘Report’). The Report calculates James’ historical annual income in two different scenarios for years 2017 to 2020. Whereas one scenario contemplates income splitting with Sharon, the second scenario attributes pre-tax corporate income of all companies in which James has an interest to James without deduction for the equivalent of pre-tax income distributed to Sharon and 50 percent of discretionary expenses to Sharon with the applicable gross up. I find that this latter scenario is the appropriate calculation of James’ annual 2020 income and rely on it for my award of interim child and spousal support. I note that Sharon is content that this calculation of James’ annual income be used for support purposes.
[74] According to the Report, under the second scenario James’ 2020 gross annual income is $1,100,000 whereas from 2017 to 2019 it was consistently in excess of $2,500,000. Nonetheless for purposes of this ruling, I have considered James’ income at the $1,100,000 amount. Again, I note that Sharon is content that for interim support purposes the $1,100,000 amount be used.
[75] Sharon’s annual income is currently $24,200.04, earned from her part-time not-for-profit employment. Her current monthly expenses are $18,964.45 and her proposed budget puts her expenses at $50,790.11 per month.
[76] Sharon is currently in receipt of non-characterized support from James in the amount of $10,000 per month since May 2019. The $10,000 is the amount Sharon requested upon separation through her then counsel pending further discussions and as counsel stated in his April 25, 2019, letter to James “until such time as an alternate arrangement might be agreed to between your wife and yourself.”
[77] Counsel for James argues that the purpose of interim support is to ensure that a dependant has sufficient means to maintain a reasonable lifestyle pending trial (Charbonneau v. Charbonneau, 2004 CanLII 47773, at para 15)
[78] James’ counsel also submits that with James’ uncharacterized support payments of $10,000 which exceed Sharon’s current child support entitlement by some $82.00 per month, based on a gross annual income of $1,100,000, Sharon’s budget is fully met when one considers the inaccuracies in the budget. These inaccuracies include the inappropriate budget inclusions of such expenses as Benjamin’s rent and car insurance along with health care costs, accounting fees and real estate association fees (the ‘Impugned Expenses’). It is also counsel’s submission that Sharon’s proposed budget can only be described as a “wish list”.
[79] In any event, counsel for James submits that the Spousal Support Advisory Guidelines (the ‘SSAGs’) should not be applied in this case as Sharon would have the Court do. He submits that the SSAGs set a “soft ceiling” of $350,000 beyond which point the SSAG formulas should no longer be automatically applied to divide income. Counsel has referred me to a number of decisions where Courts have declined to automatically apply the SSAGs in high-income cases, and instead, looked to the needs of the recipient (see Knowles v. Lindstrom, 2015 ONSC 1408; Dyck v. Dyck 2009 MBQB 112; Derbyshire v. Derbyshire, 2016 ONSC 4740).
[80] While I agree with counsel’s “soft-ceiling” submissions in high income cases, such as this, and quite apart from Sharon’s explanation of the legitimacy of the Impugned Expenses, I reject the position that Sharon does not have need. Having said that, I do find that certain of Sharon’s proposed budget expenses are excessive. For example, the proposed expenditure for utilities is $1,700 per month, double the amount Sharon currently spends. I also find an expenditure of $4,000 per month on groceries and meals outside the home for Sharon alone while allocating a monthly expense of $9,591.68 for Benjamin’s and Meredith’s food, car insurance, car repairs and health costs as excessive. Finally, a monthly proposed mortgage expense of $8,000 seems very high to me even in the circumstances of these parties.
[81] I also reject, however, James’ position that interim spousal support should not be awarded because Sharon has no debt but rather her net worth has increased by some $600,000.00 post-separation. In my opinion, Sharon should not be expected to access her capital to support herself (see Schulman v. Ganz, 2015 ONSC 3254).
[82] I have already found that Sharon and James enjoyed a very comfortable, and indeed, high standing of living while they were married. In my view, this is a fact I must consider along with the factors and objectives of section s. 15.2 of the Divorce Act. Even if Sharon was employed on a full-time basis, the standard of living that the parties enjoyed during the marriage far exceeds the standard of living Sharon can provide for herself in the foreseeable future, I have no doubt that Sharon has suffered economic hardship as a result of the parties’ separation. For all of these reasons, I find that Sharon is not only entitled to interim spousal support but is in need of it to maintain a reasonable lifestyle similar to that which she enjoyed pending a final determination of the spousal support issue.
[83] Accordingly, I would make the following interim support orders, both of which are without prejudice to either party:
i. Commencing July 1, 2022, and on the first date of each month thereafter, on a without prejudice basis, James shall pay interim child support to Sharon for the children Benjamin and Meredith in the sum of $9,918.00 per month.
ii. Commending July 1, 2022, and on the first day of each month thereafter, on a without prejudice basis, James shall pay interim spousal support in the amount of $25,500.00 per month to Sharon.
[84] I confirm that based on a gross annual income of $1,100,000.00, and assuming Meredith lives with Sharon all year and Benjamin continues to live with Sharon pursuant to the Summer Schedule, James is in agreement that the awarded child support amount of $9,918 per month is appropriate pursuant to the Federal Child Support Guidelines.
[85] The spousal support shall be taxable to Sharon and tax deductible to James.
[86] Both the interim child support and spousal support payments are, as noted above, without prejudice to either parties’ position and, in any event, subject to adjustment in the final disposition of the proceeding. Otherwise, if the enforceability of the Marriage Contract is upheld at trial, I am satisfied that Sharon has sufficient assets to compensate James for any overpayment of spousal support.
Retroactive Spousal Support to the Date of Separation
[87] Sharon claims retroactive spousal support from the date of separation. This amount, on a net of tax basis, Sharon proposes be in the sum of $547,899.50.
[88] Sharon relies on the decision of this Court in Bensky v Bensky, 2012 ONSC 4029 to advance her claim for retroactive support. In Bensky, the Court held:
The obligation to pay support commences from the date of separation. On an interim motion, the court may provide retroactive support to compensate for any deficit. The factors to be considered are the reasonableness of any delay in seeking support, the conduct of the payor, the circumstances of the payee spouse and hardship occasioned by a retroactive award (at para. 32)
[89] Based on the record before me, I do not find that there has been undue delay on the part of Sharon in bringing her claim for support. On the other hand, considering James’ voluntary non characterized monthly payments of $10,000.00 since separation together with the Marriage Contract and the circumstances in which it was signed by Sharon, I cannot attribute blame to James in not voluntarily agreeing to pay spousal support apart from the agreed $100,000 lump sum settlement. I also note that in note that in neither of the cases upon which Sharon relies to advance her claim for retroactive spousal support was the Court faced with an agreement limiting support.
[90] While I acknowledge that Courts have indeed awarded retroactive support on the interim motions, in this instance, I prefer to follow those cases that defer the issue of retroactive support to the trial judge.[^2] By definition, interim motions are designed to put in place temporary measures pending settlement or trial. Interim motions are not meant to determine the ultimate issues and they should not because the Court generally has an incomplete and often contradictory record before it without the benefit of cross-examination.
[91] In the case before me, one issue to be ultimately determined by the trial judge is the enforceability of the Marriage Contract. The determination of that issue will not only determine Sharon’s entitlement to ongoing support but well also be a major factor in resolving the issue of retroactive support. To my mind, it makes little sense to make a retroactive award today to only have Sharon repay the amount to James should the Marriage Contract be validated at trial. Furthermore, the trial judge will be in the best position with a full evidentiary record to assess whether there should be an adjustment of James’ spousal support obligations, whether it will be to the quantum or commencement date.
[92] Accordingly, I am making no order with respect to Sharon’s claim for retroactive spousal support without prejudice to Sharon advancing the claim at trial.
Sale of the Matrimonial Home
[93] Sharon also seeks an order for the sale of the Matrimonial Home. James opposes the motion.
[94] Section 2 of the Partition Act, RSO 1990, c. 4, authorizes this Court to order the sale of a jointly owned property, including a Matrimonial Home (McNeil v. McNeil, 2020 ONSC 1225 (SCJ)). Sharon, as a joint tenant, has prima facie right to an order for the partition and sale of the jointly owned Matrimonial Home (Jama v. Basdeo, 2020 ONSC 2922 (SCJ)). Furthermore. This Court is required to order that the Matrimonial Home be sold unless James, as the opposing party, has demonstrated that such an order should not be made (Jama). The onus is also on James, as the opposing party, to establish there is sufficient reasons that this Court should refuse to exercise its discretion to order the sale (Afolabi v. Fala, 2014 ONSC 1713 (SCJ)).
[95] Generally, the party opposing the sale must show malicious, vexatious or oppressive conduct to avoid the sale (Latcham v. Latcham, 2002 CanLII 44960 (ON CA)). The malicious, vexatious or oppressive conduct must relate to the brining of the partition and sale application itself and not the general conduct of the person bringing the motion (Kaphalakos v. Dayal, 2016 ONSC 3559).
[96] It is James’ position that Sharon’s past conduct is not only malicious and vexatious but also oppressive in advancing her claim for partition and sale of the Matrimonial Home. In support of his position, James relies on a litany of examples of Sharon’s bad behaviour, including the theft of his support dogs, bribing his personal sobriety coach to support her position in the litigation, encouraging the couple’s daughter, Meredith, to make false allegations of sexual misconduct and reporting certain bylaw infractions to the municipality respecting James’ renovation of the barn located on the Matrimonial Home property (the ‘Impugned Conduct’).
[97] Apart from Sharon’s denial of James’ allegations, the record before me also includes a number of emails authored by James describing Sharon in less than complimentary terms for her decision to separate as well as the dark consequences to follow from Sharon’s decision. This is a high conflict divorce in which both parties likely acted inappropriately from time to time and engaged in conduct that they may now regret.
[98] Having said that, it is my view that none of Sharon’s Impugned Conduct can be found to be malicious, vexatious or oppressive with respect to the advancement of the partition and sale application itself. If the allegations are ultimately proven to be true, they may indeed reflect poorly on Sharon’s conduct as a litigant, but I do not find such conduct as sufficient reason for me not to exercise my discretion in ordering the requested sale.
[99] As Justice Pazaratz points out in Dhaliwal v. Dhaliwal, 2020 ONSC 3971, however, in family law matters the Court must consider all relevant factors in exercising its discretion (at para. 15g). James asserts that these additional factors include the following:
a) Given that James is a recovering alcoholic, he requires stability, and he fears that the stress of causing him to find new accommodations, in addition to the demands of managing Forest Products and navigating his divorce, will cause him to give into the temptations of his addition.
b) While I am sympathetic to James’ struggles as a recovering alcoholic and applaud his recent history of sobriety, because James has not provided this Court with any medical or other evidence to support his fear, I am not persuaded to afford it much weight in the exercise of my discretion.
c) James also argues that a sale of the Matrimonial Home will displace his sons who live on the property and will disrupt the wedding of Andrew who plans to be married on the property this summer.
d) As Justice Pazaratz finds in Dhaliwal, the mere existence of children in the matrimonial home is not sufficient reason to refuse the sale. James must establish a more serious impact that the inevitable adjustments that must be made when parents separate. This is particularly so in my opinion when the children are 23 years of age and working full-time. I am also of the view that any sale process can accommodate Andrew’s wedding to take place in the next few months.
e) It is James’ position that a sale would unfairly prejudice his claim for exclusive possession of the Matrimonial Home (see Latcham v Latcham (2002), 2002 CanLII 44960 (OCA)). While I agree that this Court should not exercise its discretion in favour of a sale where it is shown that a legitimate family claim would be prejudiced, I am not convinced that James has demonstrated that his claim for exclusive possession would be prejudiced in this instance. I have come to this conclusion because not only has James failed to bring a motion for exclusive possession of the Matrimonial Home since the parties separated in the spring of 2019, but he has failed to do so in the face of Sharon’s November 2020 motion for partition and sale. James’ failure to act may indeed be indicative of his assessment of the likelihood of success of such a motion.
f) Finally, James asserts that the sale should not be ordered because Sharon has not demonstrated a need for her equity from the Matrimonial Home given that she has access to funds equal to at least $1.3 million.
[100] In response to this position, I rely on the findings of Justice Shaw in Delongte v. Delongte, 2019 ONSC 6954:
It is not uncommon that parties wish to access the equity in the Matrimonial Home for a variety of reasons such as purchasing other property or paying debt… there is no basis for the applicant to successfully resist the sale of the sale of the matrimonial home… the fact that a party owns other assets does not displace a joint owner’s prima facie right to have a property sold pursuant to the Partition Act (paras. 39, 40, 44).
[101] I also rely on the decision of Justice Harper in Koehler v. Koehler, 2015 ONSC 5777, where the Court found that the wife should be permitted to have her equity out of the family home as soon as possible where she, as is Sharon, living in accommodations below the standard to which she was used to.
[102] Accordingly, for the above noted reasons, I order that the Matrimonial Home be listed for sale.
[103] Counsel for James submitted that should I indeed make an order for partition and sale of the Matrimonial Home, that counsel be permitted an opportunity to discuss and agree on the terms of sale. Counsel for Sharon did not object to the request and I am happy to agree to provide counsel with the requested opportunity.
[104] In the event that the parties are unable to agree on the terms of sale within 21 days from the date of release of these Reasons, they should contact the Trial Coordinator to arrange an appointment before me for this purpose. Otherwise, any agreed form of order can be directed to my assistant Kelly Flanders at kelly.flanders@ontario.ca for my review and signature.
[105] Finally, I would encourage the parties to agree on the issue of costs. If, however, the parties are unable to do so, written submissions are to be delivered to my chambers. The Applicant may make written submissions as to costs within 21 days of the release of these Reasons. The Respondent will have 10 days after receipt of Applicant’s submissions to respond and the Applicant will have a further 5 days to reply. Each party’s initial written submissions shall not exceed three double-spaced pages, exclusive of offers to settle, cost outlines and authorities while the plaintiff’s reply submissions, if any, shall not exceed two double spaced pages. All costs submissions shall be forwarded to my attention by way of email to my Judicial Secretary, Kelly Flanders, at kelly.flanders@ontario.ca and a copy to Kitchener.SCJJA@ontario.ca. If no submissions are received within this timeframe, the parties will be deemed to have settled the issue of costs between themselves.
[^1]: A second possible avenue for challenging the Marriage Contract’s limit on spousal support is on the basis of s. 33(4)(a) of the Family Law Act. As counsel did not focus their submissions on this provisions, I do not address it in my reasons.
[^2]: See for example, Samis (Litigation Guardian of) v. Samis, 2011 ONCJ 273; Brandl v. Rolston, 2012 BCSC 902; Ryan v. Ryan, 2018 ONSC 6468.
COURT FILE NO.: FC-20-55490
DATE: 2022-06-30
ONTARIO
SUPERIOR COURT OF JUSTICE
Sharon Hutton
Applicant
– and –
James Albert Hutton
Respondent
REASONS FOR JUDGMENT
M.J. Valente, J.
Released: June 30, 2022