Court File and Parties

COURT FILE NO.: FC-19-477 DATE: 2024-06-25

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: J.S., Applicant AND S.C., Respondent

BEFORE: Justice Hélène C. Desormeau

COUNSEL: Michael Rappaport, for the Applicant Rebecca Rosenstock, for the Respondent

HEARD: June 17, 2024

Ruling on Motion

DESORMEAU J.

Overview

[1] The parties have submitted over 400 pages for a one-hour motion, but no factums. As put on record at the motion, the mother did not comply with the Practice Directions regarding page limits and double spacing. Should this occur in the future by either party, the motion shall be dismissed with prejudice.

[2] The mother argued for the following relief:

1. The full proceeds of sale from the Hanlon property shall be disbursed to the mother.
2. The mother shall apply the proceeds from the sale of Hanlon, as follows, in descending priority: a. Payout of the first mortgage to Home Trust; b. Payout of the mortgage break penalty to Home Trust; c. Payout of the Real Estate commission; d. Payout of the second mortgage on Georgina to 2822788 ONTARIO INC. and 12861305 CANADA LTD; e. Legal fees for the sale of Hanlon; f. Legal fees for the payout of the Georgina second mortgage; and g. Legal fees for the removal of the Matrimonial Home designation on Hanlon, in the event that the Applicant fails to remove the designation at his own expense.
3. The father's claims and entitlement to the Hanlon property shall be addressed at trial and set-off against any competing claims and amounts owing.
4. The father shall take steps to remove the matrimonial home designation filed by him against Hanlon prior to June 10, 2024. In the event he does not, the designation shall be removed pursuant to 23(b) FLA.

[3] The first motion date was adjourned to allow the sale to occur and provide the father time to file materials. At that time, the father agreed to cooperate with the sale, and took no issue with the real estate commission being paid, the discharge of the mortgage on Hanlon and payment for the mortgage break penalty, as well as payment of legal fees and disbursements related to the sale. He also agreed to remove the matrimonial home designation. However, he requested the remainder of the proceeds remain in trust pending argument of this motion.

[4] At the return of the motion, by way of cross-motion, the father sought the following orders:

1. An order for distribution of the proceeds of sale of the matrimonial home, [the Hanlon property], in accordance with the marriage contract.
2. An order for the distribution of the proceeds of sale of the jointly owned cottage at [redacted], Mont-Tremblant.
3. An order that the mother pay child support to the father for the two children in accordance with her income of $62,940 for 2023.

[5] The child support claim was argued at the April 4, 2024, motion, and dismissed on May 31, 2024, by this court. At that time, this court found there were too many deficiencies in the father’s materials, including disclosure orders which had not been satisfied to grant the relief sought. At this motion, no evidence was provided to establish these deficiencies were remedied. As such, the father’s motion regarding child support is again dismissed, pending determination of his income from all sources.

[6] Consequently, the remaining issues for determination at this motion were:

1. What payouts should be permitted regarding the sale of the Hanlon property, including payout of full proceeds to the mother, and permitting her to pay out the second mortgage on Georgina to 2822788 ONTARIO INC. and 12861305 CANADA LTD and pay the legal fees for the payout of the Georgina second mortgage.
2. The mother’s request that the father's claims and entitlement to the Hanlon property be addressed at trial and set-off against any competing claims and amounts owing.
3. The father’s request for an order for distribution of the proceeds of sale of the matrimonial home, [the Hanlon property], in accordance with the marriage contract.
4. The father’s request for an order for the distribution of the proceeds of sale of the jointly owned cottage at [redacted], Mont-Tremblant.

[7] The mother also argued that the amounts fixed in the May 31, 2024, ruling ought to be payable from the proceeds of sale of Hanlon as well. These total $49,677.10, and include:

a. Arrears in section 7 fixed at $25,916.73, which the court ordered be repaid at a rate of $500.00 per month by the father, commencing June 1, 2024; b. Child support arrears of $27,000.00, minus payments to FRO of $5,239.63, totalling $21,760.37 (as of June 17, 2024); c. Child support for June 1, 2024, of $1,000.00; d. Costs from the contempt/ non-compliance motion for which submissions have not yet been received; and e. The outstanding costs order from March 20, 2024, of $1,000.00.

The Mother’s Position

[8] The parties were married November 5, 2011. On May 3, 2012, the parties signed a marriage contact. The father had independent legal advice whereas the mother acknowledged being a lawyer practicing in family law. The marriage contract included schedules setting out each parties’ assets and liabilities at the date of marriage. The Hanlon property was listed as solely owned by the mother and valued at $357,000.00, with a corresponding RBC Mortgage standing at $284,023.64 on date of marriage. The relevant provisions of the marriage contact were:

2.1(c) “date of marriage residence” or “DOM residence” means the [Hanlon property], which the parties have been ordinarily occupying as their family residence since October 2010, which property is owned solely by [S.C.] and includes any other residence acquired in substitution for it.

6.5 [J.S.] shall be entitled to half the equity in the DOM residence, after deduction of (i) [S.C.]’s excluded share in the DOM residence (which accrued from the date of purchase to the date of marriage) and (ii) [S.C.]’s proportionate share of the appreciation in equity on the DOM residence (as calculated form the date of marriage to the date of breakdown of the relationship).

7.2 [S.C.] and [J.S.] acknowledge and agree that the fair market value of [Hanlon] on the date of marriage was $357,000.00. [S.C.] and [J.S.] further acknowledge that [Hanlon] was subject to an outstanding mortgage in the amount of $284,023.64 in favour of Royal Bank of Canada as of the date of marriage, and that [S.C.] is the mortgagor.

7.3 [S.C.] and [J.S.] acknowledge and agree that the value of [S.C.]’s interest in [Hanlon] on the date of marriage is $72,976.36, calculated as follows: fair market value at date of marriage less the outstanding mortgage on [Hanlon] at date of marriage.

7.4 [S.C.] and [J.S.] acknowledge and agree that in the event of a breakdown of their relationship, [S.C.] shall be entitled to, in priority to [J.S.], the first $72,976.36 of equity in the DOM residence as well as the first 20.44% of the appreciated equity in the DOM residence above the $72,976.36. Following which, the parties would share equally any remaining equity in the home after payment of any mortgage, loan, or line of credit outstanding and secured against the home.

8.3 Except as otherwise provided in this Agreement, [S.C.] and [J.S.] may dispose of, encumber, or otherwise deal with their respective property as they see fit, free of any claims by the other as if they were unmarried.

8.4 Nothing in this Agreement restricts or modifies the rights or obligations of either party with respect to the possession, disposition, or encumbrance of a matrimonial home pursuant to Part II of the Family Law Act.

8.6 In the event of a breakdown of the relationship, the parties shall divide: (a) their joint assets, and (b) the equity in the matrimonial home (DOM residence) accruing from the date of marriage to the date of separation.

[9] The mother’s evidence was that the Hanlon home was sold for $775,000.00 with a closing date of June 11, 2024.

[10] Fair market value at date of separation, March 27, 2018, as per the appraisal of Diane Lebreton, was $390,000.00. Attempts by the father to fix deficiencies by hiring friends resulted in payments by the mother to remedy what was allegedly fixed.

[11] She argued that despite the terms of the marriage contract, the father interfered with and prevented her from selling the Hanlon property since 2018, taking such actions or inactions such as registering a matrimonial home designation/refusing to sign listing agreements and causing delay regarding refinancing resulting in higher interest rates being charged. The father also interfered with the tenants occupying the Hanlon property and allegedly intimidated the mother and children while they were still in the home.

[12] The mother also argued that because of the father’s “shenanigans”, she had to take on a second mortgage on her Georgina property. She explained what the second mortgage was for, including paying for legal fees, s.7 expenses, etc. In February 2024, the second mortgage was called in. If she does not pay out the second mortgage of $250,000.00, she will be forced to sell the Georgina property in which she and the children reside.

[13] The mother alleged that her tenant moved out in December 2023, and she was unable to find a new tenant, which left her out of pocket approximately $5,000 per month for the mortgage, taxes, etc. Further, the home needed significant repairs which, coupled with the cost of staging, totaled approximately $10,000.00. Additionally, she paid $4,000.00 on a 28.8% interest credit card for home repairs, $1,853 for staging and $2,478.95 for items to stage.

[14] There was contested evidence regarding the payments made by the mother and/or father regarding the Tremblant property, including when the property was rented and who received the rental income. The mother argued she incurred over $7,000.00 by having to bring a motion for partition and sale in Quebec. The mother still wished to amend her answer to include monetary claims regarding Tremblant. She confirmed the property sold in November 2020, and what remains in trust is $43,310.30, which she argued is insufficient to satisfy her “Tremblant claims” against the father.

[15] As to the amounts owed by the father to the mother, those include child support from February 2022, and s.7 expenses, both of which were set by the court in the May 31, 2024, ruling. However, the total s.7 expenses incurred as of April 17, 2024, were $33,406.74, inclusive of the amount fixed at $25,916.73 on May 31, 2024. FRO apparently was unable to enforce many of the s.7 expenses given they were not specified by the ruling. The mother confirmed receipt of $5,239.63 by FRO, which ought to be deducted from the total child support ordered at $27,000.00 [$21,760.37] and s.7 of $25,916.73, fixed by the court. Based on the current May 31, 2024, ruling therefore, the father still owed $47,677.10, plus June 2024 child support and an outstanding costs order of $1,000.00, totalling $49,677.10.

[16] The mother argued that she must also account for capital gains, potential tax liabilities, closing costs, etc.

[17] Pursuant to her marriage contract, her initial net equity is $72,976.36 plus 20.44% of the appreciated equity of Hanlon. The equity at separation was $177,417, based on the appraisal of Diane Lebreton of $390,000.00 minus the $212,583.04 mortgage. The 20.44% appreciated equity from marriage to separation was $21,347.66.

[18] It was submitted that the mother was entitled to receive $72,976.36 (the initial equity) plus the $21,347.66 (appreciated equity), from the net equity. The calculation would be $177,417 minus $72,976.36 minus $21,347.66 [$94,324.02], resulting in $83,092.98 remaining, which both parties would notionally be entitled to half the remaining, being $41,546.49.

[19] At the motion, the mother suggested she be permitted to pay the following expenses from the proceeds of sale of the Hanlon property:

a. Mortgage on Hanlon (approximately $468,065.91); b. Mortgage Break Fee for Hanlon Mortgage (estimated at $10,000 to $15,000); c. Second Mortgage on Georgina (estimated at $237,970); d. Home Depot Credit Card, used to pay repair costs for Hanlon ($4,000); e. Repayment to a friend who paid for the painters ($3,000); f. Real Estate Commission (estimated at $39,408.75); g. Legal fees for the sale (estimated at $2,000); h. Legal fees for removal of the Matrimonial Home Designation (estimated at $500); i. Legal fees for the payout of the second mortgage (estimated at $500); and j. Capital gains taxes (estimated at $20,000).

[20] The mother submitted that from the father’s share of the net proceeds, he should be ordered to immediately satisfy the May 31, 2024, ruling regarding s. 7 expenses, child support, the June 2024 child support payment of $1,000, and the $1,000.00 costs order of March 2024, totalling $49,677.10, plus any costs not yet determined stemming from the April 4, 2024, motion.

[21] The mother argued her outstanding financial claims against the father include the increased costs for the Hanlon property due to the father’s actions, s.7 expenses not addressed in the May 31, 2024, ruling, rental income from the Tremblant property, etc.

[22] In her reply evidence, the mother submitted there was evidence of post-separation computer hacking, allegedly by the father. She had already plead the claim of intrusion upon seclusion and asked the court to consider this along with her other claims when weighing whether there should be release of the father’s entitlement to the equity in Hanlon.

[23] The mother denied any argument of coercion to have the father sign the marriage contract, and argued he signed same of his own volition. Further, she submitted the father’s counsel seemed well-versed in family law during discussions and negotiations.

[24] Whereas the father argued the mother received $137,075.00 in rental income from May 2019 to January 2024 from Hanlon, the mother submitted that did not include the expenses for Hanlon. She was unable to provide a more fulsome comment as to how much she would have received in net rental income given her health issues.

[25] Following the sale of Hanlon, the mother confirmed there remained $245,293.00 held in trust. The first mortgage in favour of Computershare trust company (Home trust company) was paid out at $482,798.96; real estate commission paid was $18,787.50.

[26] Further, she provided evidence that the second mortgage on Georgina was $236,323.03 due on June 11, 2024, plus $74.96 per diem interest. The mortgage holder was demanding payment in full, failing which, if not paid by July 13, 2024, the mother would have to sell Georgina where she and the children reside.

[27] The mother denied the allegation that she refused to buy out the father’s interest in Hanlon, and disputed or denied most allegations raised in the father’s affidavit.

The Father’s Position

[28] The father argued that he signed the marriage contract under duress, without financial disclosure and without independent legal advice (“ILA”). He argued ILA “purportedly on [his] behalf” was provided by a client of Deja Tech, who “wasn’t qualified to provide advice” as he was a real estate lawyer. Nevertheless, he was not seeking to set aside the marriage contract.

[29] He submitted that in applying the formula to divide the proceeds of Hanlon, they must also divide the remaining proceeds of the Tremblant property.

[30] The father disputed there was a mortgage on the Hanlon property at date of marriage, arguing the mother purchased it in 2007 without a mortgage. He then claimed that on March 10, 2017, “in anticipation of separation, the [mother] registered a mortgage of $374,000” on Hanlon without his knowledge or consent.

[31] At paragraph 11 of his affidavit dated June 12, 2024, the father argued value of the home at date of marriage was $450,000.00, with an outstanding mortgage of $284,023.64. However, at paragraph 14, the father valued the home at $357,000.00.

[32] The father submitted that the mother’s equity prior to division would be calculated as follows:

1. $72,976.36 as per the marriage contact
2. Appreciated equity: $775,000.00 (date of sale value) minus $357,000.00 (value of home at date of marriage) = $418,000.00
3. 20.44% of $418,000.00 = $85,439.20
4. $72,976.36 + $84,439.20 = $158,415.56.

[33] He submitted that half the mother’s equity prior to division is $158,415.56. As such, the remaining equity to be divided was $418,000.00 minus $158,415.56 = $259,584.44 or $129,792.22 each.

[34] The father argued that since separation six years prior, the mother refused to purchase his interest in the home or list the home for sale. Instead, she refinanced and withdrew $100,000.00 from the joint line of credit registered on Hanlon so she could purchase the Georgina home for $740,000.00. To support this argument, the father noted that the mother was on disability and had no income, thus the $100,000.00 went toward the Georgina purchase. She then rented out the Hanlon property to her father and other tenants. She has received $137,075.00 in rental income from May 2019 to January 2024 from Hanlon. The father was not requesting half the rental income but requested that his interest be calculated as per the marriage contract based on the value of the matrimonial home as of June 11, 2024, or $775,000.00, when the father removed the matrimonial home designation.

[35] As for the Tremblant property, this was jointly owed and sold in the spring of 2020. There was still $48,310.30 in trust from that sale. He proposed dividing the net proceeds of sale equally, whereby each party would receive $24,155.15. The father provided disputed evidence as to the rental agreements or lack thereof, and who received the monies.

[36] As to the mother’s assertion that she would lose the Georgina property if she was unable to discharge the mortgage, the father argued there was a lack of evidence to support her statement.

[37] As noted above, the father’s claim to re-litigate the child support issue was dismissed. As such, the evidence in support of same was not outlined herein.

[38] The father however argued that the child support owed is going through the FRO and ought not be paid out immediately to the mother.

Analysis

[39] While the mother argued post-separation computer hacking by the father to substantiate her claim of intrusion upon seclusion, given this argument was raised as a new issue in reply, and the father did not have a right of “re-reply”, that argument was not given any weight at this motion and the court declines to make any findings.

[40] The father raised argument as to the validity of the marriage contract, disclosure, and independent legal advice. This court notes that financial disclosure was provided as a schedule to the marriage contract, and the father has not sought to set aside the marriage contract. Further, the lawyer who provided the father ILA was a client of the father’s own business. Consequently, this court is not prepared to set aside the marriage contract.

[41] This court finds that the marriage contract is valid.

[42] This court finds, on a balance of probabilities, that the Hanlon property had a mortgage of $284,023.64 as of date of marriage, as evidenced in the marriage contract at section 7.2 and as per the Schedule A. There was no evidence to support the father’s submission that the value of the home at date of marriage was $450,000.00.

[43] While the father argued that date of sale value ought to be used to determine each parties’ interest in the net proceeds of sale, he also argued the parties ought to apply the marriage contact. These two arguments do not align.

[44] At section 6.5, the marriage contract identified which figures were appropriate and they include the date of marriage value, and date of separation value, as opposed to date of sale value.

[45] Further, given the Hanlon property was solely owned by the mother, and there was no evidence the father made any financial contributions toward same since following separation, there would be no reason to use present day value over following what was outlined in the marriage contract.

[46] As such, this court finds that the value of the Hanlon property at date of marriage was $357,000.00, and subject to a mortgage in the amount of $284,023.64. The mother’s interest at that time was $72,976.36. The mother was entitled to the first $72,976.36 of equity and the first 20.44% of the appreciated equity in the date of marriage residence above the $72,976.36.

[47] Based on the appraised value of the home at date of separation of $390,000.00 minus the outstanding mortgage of $212,583.04, the equity of the date of marriage at separation was $177,417.96. The 20.44% appreciated equity from date of marriage to separation was $21,347.66. As such, from the $177,417.00 equity, the mother is entitled to receive $72,976.36 (the initial equity) plus the $21,347.66 (appreciated equity), or $94,324.02 from the net equity of the sale of the Hanlon property. The result shows there remains $83,092.98 of equity, to which both parties are equally entitled to receive half, or $41,546.49.

[48] Pursuant to the sale of the Hanlon property, total proceeds of sale remaining in trust is $245,293.00. Pursuant to the marriage contract calculations, the equity of the date of marriage residence at separation was $177,417.96. The difference between these two figures, $67,875.04 is rightfully the mothers and this amount shall therefore be released to her.

[49] This court finds, on a balance of probabilities, that the father attempted to frustrate or impede sale of the mother’s Hanlon property. These actions included registering a matrimonial home designation on title, which ran contrary to the s. 8.3 of the marriage contract that stated that both parties could dispose of, encumber, or otherwise deal with their respective property as they saw fit, free of any claims by the other as if they were unmarried.

[50] As a result of the father’s actions, it took six years to dispose of the home. These actions had financial consequences for the mother and the children. Further, given the financial hardship borne by the mother in supporting the children and the household since date of separation, this court is of the view that it is appropriate to order that the child support and s.7 expenses ordered on May 31, 2024, as well as the outstanding costs order ($1,000), and child support for June 1, 2024 ($1,000) be payable out of the father’s share of the net proceeds of sale. As noted above, this amount totals $49,677.10.

[51] As for the division of net proceeds of sale for the Tremblant property, the evidence was highly contested and disclosure has not, to this court’s knowledge, yet been satisfied. Furthermore, this court is not prepared to address this issue until the claims are properly articulated in the amended Application and/or amended Answer.

[52] Accordingly, the father’s request for an order for the distribution of the proceeds of sale of the jointly owned cottage at [redacted], Mont-Tremblant is dismissed without prejudice to being argued at trial.

Disposition

[53] The mother shall receive all the net proceeds of sale from the Hanlon property, $245,293.00 calculated as follows:

a. $94,324.02 pursuant to the marriage contract, the equity from date of marriage, plus the appreciated equity to date of separation. b. $41,546.49 from the mother’s share of the date of separation value of the net proceeds. c. $41,546.49 from the father’s share of the date of separation value of the net proceeds to reflect payment for the outstanding child support, s.7 expenses, and June 1, 2024, child support. d. the balance of the proceeds of sale from Hanlon property, being $67,875.04 shall be released to the mother.

[54] The mother shall apply the net proceeds of sale toward the claims advanced at paragraph 2 of her notice of motion and/or paragraph 19 of this decision.

[55] This results in a shortfall of $8,130.61 ($49,677.10 minus $41,546.49) owed and payable by the father to the mother, which shall be enforced by the FRO as child support arrears.

[56] Any remaining claims and/or entitlements by the father regarding the Hanlon property shall be addressed at trial.

[57] The father’s claim to adjust child support is dismissed on the same terms as the May 31, 2024, ruling.

[58] The father’s request for an order for the distribution of the proceeds of sale of the jointly owned cottage at [redacted], Mont-Tremblant is dismissed without prejudice to being argued at trial.

[59] For reasons put on record, the decision released May 31, 2024, and future decisions shall be initialized as to protect the children in this case. The parties’ names and children’s names therefore shall henceforth be referenced by initials on any rulings/ judgments which might be sent for publishing.

[60] If the parties are unable to settle the issue of costs between them, they may provide written submissions to me. Submissions shall not exceed 3 pages, excluding bills of costs, offers to settle, and case law. The mothers shall be delivered within 30 days, and the fathers shall be delivered within 45 days, with ten days to reply by the mother.

Madam Justice H. Desormeau Released: June 25, 2024