COURT FILE NO.: FS-13-387824 DATE: 20240202

ONTARIO SUPERIOR COURT OF JUSTICE

RE: ISKRA SARAFOVA, Applicant AND: VESSELIN SARAFOV, Respondent

BEFORE: Justice M. Sharma

HEARD: October 23 and November 15, 2023

COUNSEL: Christopher Yu and Diana Isaac, counsel for the Applicant Jeff Rechtshaffen and Keith Davis, counsel for the Respondent

JUDGMENT (uncontested trial)

[1] On October 4, 2022, I granted the Applicant’s motion striking the Respondent’s pleadings pursuant to rule 1(8) of the Family Law Rules. I ordered that this matter proceed to an uncontested trial, however, I granted the Respondent an opportunity to cross-examine the Applicant. He was not permitted to lead evidence.

Overview of Key Facts

[2] The Applicant, Ms. Sarafova, and the Respondent, Mr. Sarafov, were married on December 22, 1989, and separated on October 5, 2010. They have two adult children born in 1991 and 1998.

[3] Through the marriage, parties resided at their former matrimonial home, 27 Glenvale Blvd, Toronto, Ontario (“Matrimonial Home”). Title to the Matrimonial home was registered solely in the Respondent’s name. After separation in 2010, the Respondent vacated the Matrimonial home and the Applicant continued to reside there with the children for 11 more years. The Matrimonial Home was sold and closed on April 1, 2022.

[4] This Application was commenced in 2013. On December 20, 2013, parties entered into an interim separation agreement which provided that the Applicant would pay the Respondent temporary and without prejudice spousal support of $8,000 per month. In 2015, parties had a Settlement Conference. Parties took no further steps to advance this case until 2022.

[5] From 2013 onwards, the Applicant continued to pay spousal support to the Respondent. However, sometimes it was for the full amount, sometimes she paid less than what the interim separation agreement required, and in some months she paid nothing. The Family Responsibility Office (“FRO”) was enforcing payment.

[6] On March 4 2022, I heard a motion brought by the Applicant to have funds distributed from the net proceeds of sale of the Matrimonial Home to pay off FRO and other creditors, with the balance of funds being held in trust by the real estate lawyer. What triggered this motion was a FRO default hearing. I granted the Applicant’s motion, which included the release of funds from the net proceeds of sale to FRO in the amount of $150,000.

[7] On April 29, 2022, Faieta J. terminated the Applicant’s interim support obligation under the Interim Separation Agreement.

[8] There are no longer parenting issues, as the children are now adults. The children resided with the Applicant since separation, although the Respondent did not pay child support.

[9] As the Respondent’s entitlement to interim spousal support has been terminated, and his pleadings have been struck, he has no claim before this Court for on-going spousal support. In any event, the Applicant takes the position that the Respondent is intentionally underemployed, and she has fully met her spousal support obligations.

[10] The outstanding issues are:

a. The Applicant’s resulting trust claim in the equity of the Matrimonial Home since separation until its sale. b. Equalization of Net Family Property, including an accounting of post-separation adjustments. c. Retroactive Support Claims – spousal, child and s. 7 expenses. d. A divorce. e. Costs.

[11] It is the Applicant’s position that, after she receives the balance of funds held in trust from the sale of the Matrimonial Home, there should be a clean break with neither party having a financial obligation towards the other. She argues that over the preceding 12 years since separation, she has far exceeded her financial obligations towards the Respondent, and that all claims between the parties should be dismissed.

[12] I agree with the Applicant’s position for the following reasons.

Issues & Analysis

Issue #1: Applicant’s resulting trust claim in the Matrimonial Home

[13] The Matrimonial Home was purchased on August 1, 2007 for $688,000.

[14] The Respondent did not contribute financially to the acquisition or maintenance of the Matrimonial Home. He did not put down any funds towards its purchase. [1] The only evidence before me is that the Applicant paid all costs for the downpayment of the home, the bi-weekly mortgage payments, maintenance costs, tax bills, and utility bills.

[15] The Applicant explains that when the home was purchased, she had just recently purchased a dentistry practice. On the advice of her accountant, title to the Matrimonial Home was placed in the name of the Respondent to limit her potential liability.

[16] The Respondent only lived in the Matrimonial Home for three years prior to separation. Post separation, the Applicant continued to make all payments until the Fall of 2021 when FRO began garnishing her bank accounts. As a result, the Matrimonial Home needed to be sold.

[17] The Respondent did not take any steps, following separation in October 2010, to assert a right of occupancy or ownership to the Matrimonial Home.

[18] Section 14 of the Family Law Act states that the law of resulting trust continues to apply to questions of ownership property between spouses.

[19] The legal principle of resulting trust has been explained as follows. “…[T]he underlying notion of the resulting trust is that it is imposed ‘to return property to the person who gave it and is entitled to it beneficially, from someone else who has title to it. Thus the beneficial interest ‘results’ (jumps back) to the true owner’”: Kerr v. Baranow, 2011 SCC 10, [2011] 1 SCR 269 at para 16, citing A.H. Oosterhoff, et al., Oosterhoff on Trusts: Text, Commentary and Materials (7th ed. 2009) at p. 25. Often, resulting trusts arise when there is a gratuitous transfer. Kerr, at para 16.

[20] When determining whether a resulting trust has arisen, the actual intention of the grantor is the governing consideration: Kerr, at para 18, citing Pecore v. Pecore, 2007 SCC 17, [2007] 1 S.C.R. 795 at para. 44. Generally, the law presumes that the grantor intended to create a trust, rather than to make a gift. The onus is on the person receiving the transfer to demonstrate that a gift was intended. This is because equity presumes bargains and not gifts: Kerr, at para. 19.

[21] In this case, I am satisfied that the Applicant has established a resulting trust. The Applicant paid for all costs related to the Matrimonial Home. There is no evidence that it was the Applicant’s intention to gift the Respondent the Matrimonial Home when title was put in his name solely. The Applicant offered a sensible reason why the Matrimonial Home was put in his name. The purpose was not to defeat existing or real creditors; there were no creditors, just the potential of future creditors: Launchbury v. Launchbury at para 17. The Applicant further states this was not a gift and that she received no consideration from the Respondent. The Respondent has not rebutted the presumption of a resulting trust in his cross-examination of the Applicant. Finally, his refusal to take any steps to resume possession or ownership of the Matrimonial Home in over a decade since the parties’ separation further supports the conclusion that he treated the home as the Applicant’s. The facts of this case strongly resemble the facts in Nussbaum v. Nussbaum, where the Court also found a resulting trust.

[22] I also find that the Respondent would be unjustly enriched if a resulting trust were not found. The Respondent made no contributions towards the purchase or maintenance of the Matrimonial Home in the years prior to and after separation. A corresponding deprivation to the Applicant would result if the Respondent were to reap the benefit of the increase in value of the Matrimonial Home since separation when he made no contributions towards paying its mortgage or maintenance costs before or after separation. There would be no juristic reason for this enrichment.

[23] S. 4(2) of the Family Law Act provides special treatment with respect to the equalization of the value of the Matrimonial Home during the marriage, regardless of ownership. Notwithstanding my finding that a resulting trust to the Matrimonial Home exists, the Respondent is still entitled to equalization of the increase in value of the Matrimonial Home during the marriage, which would be factored into in Net Family Property calculations discussed below.

[24] There remains approximately $785,366.30 held in trust by the real estate law firm, Marani Law LLP, from the sale of the Matrimonial Home. As I found that the property was held in trust for the Applicant by the Respondent, and as I find below no further amounts are owing to the Respondent, the remaining proceeds of sale held in trust belong to the Applicant.

[25] Accordingly, I make the following orders:

a. This Court declares that the Respondent, Vesselin Sarafov, held title to the former Matrimonial Home, located at 27 Glenvale Boulevard, Toronto, Ontario M4G 2V3, in trust for the Applicant by way of a resulting trust. b. The remaining funds held in trust with Marani Law LLP from the sale of 27 Glenvale Boulevard, Toronto, Ontario M4G 2V3, shall be disbursed to the Applicant immediately.

[26] Because the Applicant is successful in her resulting trust claim, I need not address her alternative argument that the Respondent would owe the Applicant a post-separation adjustment of $202,858.29, representing half of all the expenses she paid on the home ($405,716.58) from separation until its sale. There was no contrary evidence challenging this amount.

Issue 2: Property and Equalization

[27] The Applicant has prepared her Net Family Property Statement (“NFP”), on the presumption that she would be successful in her resulting trust claim (i.e., it identifies the Matrimonial Home as being owned solely by her). Relying on her figures, it would result in an equalization payment by the Applicant to the Respondent in the amount of $191,991.03.

[28] The NFP identifies the date of separation value of the Matrimonial Home at $745,000. It also imputes values for certain items that belong to the Respondent, but for which he did not value or produce disclosure to substantiate the value. I find that none of the imputed values are unreasonable. Some were given no value.

[29] The NFP also valued the Applicant’s dentistry business and its disposition costs. The values were supported by a valuation report of Mr. Harry Figov, a Chartered Business Valuator with HJF Financial Inc. No value was placed on the Respondent’s photography business, although there was some evidence he carried on this business or was capable of carrying on this business at the date of separation.

[30] During her cross-examination, the Respondent’s counsel questioned whether a shareholder loan on the date of separation from the Applicant’s dental practice in the sum of $311,917, was in fact dividend income for the Applicant’s business, rather than a debt, if it were not repaid. If it were not a debt, then the NFP conclusions would be significantly different. The Applicant testified that this amount was a debt to her business, which was used to pay for the Matrimonial Home.

[31] I am satisfied that this was a legitimate debt of the Applicant. On re-examination, the Applicant was taken to Mr. Figov’s Valuation Report which identified this debt as a corresponding asset of her dentistry practice. Therefore, it was accounted for as a debt to the Applicant and asset for the corporation. There was no other evidence to establish that this amount was not a true debt. On a balance of probabilities, I am satisfied this was a debt of the Applicant as of the date of separation.

[32] While the Applicant’s NFP shows she owes the Respondent $191,991.03, she says she has made numerous advances to the Respondent’s benefit that vastly exceed the amount she would owe the Applicant as an equalization payment. These advances total $369,493.36, broken down as follows:

a. $257,149.71 for the Respondent’s benefit to discharge a Canada Revenue Agency Lien that was registered against the Matrimonial Home; b. $61,941.25 for the Respondent’s benefit to discharge his former credit card debts which were secured against the Matrimonial Home; c. $21,443.73 to the Respondent’s former lawyers for their unpaid legal bills; d. $4,052.04, representing half of a Joint CIBC Line of Credit which was in collections pursuant to a previous Order I made on March 24, 2022; e. $24,906.63 pursuant to the Order of Kristjanson J. of September 20, 2023 for the Respondent’s former family lawyer at the time and current counsel at trial.

[33] The Trust Ledger Statement from the closing of the sale of the Matrimonial Home evidences the above amounts as being paid from the net proceeds of sale to the Respondent’s benefit, except for the amount ordered to be paid by Kristjanson J. ($24,906.63), which was also ordered to be released from the net proceeds of sale, again to the Respondent’s benefit.

[34] I am satisfied that the Applicant made advances to the benefit of the Respondent in the amount of $369,493.36 for which the Applicant is entitled to a credit against the $191,991.03 equalization payment she owes the Respondent. As a result, I find the Respondent owes the Applicant the difference, namely, $177,502.33.

[35] The Applicant’s position at trial, however, is that because she is unlikely to collect this amount from the Respondent, she seeks an Order that there be no further obligation between herself and the Respondent. The other claims that did exist between the parties are the Applicant’s claim for child support from the Respondent, and the Respondent’s spousal support claim. In the reasons that follow, I dismiss any current claims before this court for retroactive child and spousal support.

Issue #3: Retroactive support claims

[36] Since the Order of Faieta J. of April 29, 2022 terminated the Applicant’s interim spousal support obligations under the parties’ Interim Separation Agreement, and because the Respondent’s claim for continued support was struck, there is no claim for on-going spousal support before the Court. As there is no lis before the Court for on-going spousal support, I make no order on this issue.

[37] However, it is necessary that I deal with any potential retroactive claim for spousal support and determine whether the Applicant has satisfied her obligation. This is because, by the Applicant’s admission, she paid amounts that were less than what she agreed to pay pursuant to their Interim Separation Agreement dated December 21, 2013. Because FRO may seek to enforce any retroactive amount that existed, prior to the Respondent’s pleadings being struck, I find it is necessary to determine this issue to bring finality to the parties.

[38] I find that the Applicant has satisfied any retroactive spousal support obligation she owed to the Respondent for the following reasons and based on the Applicant’s evidence which I found to be credible and reliable:

a. From October 2010 to December 31, 2011, the Applicant paid non-taxable spousal support to the Respondent totalling $150,000. b. From January 1, 2012 to December 31, 2022, the Applicant paid taxable spousal support to the Respondent totalling $734,373.73. From 2012 to 2022, the amounts should have been consistent each year, but they ranged from $96,000 a year to $32,938.17 per year. There was a noticeable drop in payments she made in the years 2020 to 2022, which she explained was due in large part to the impact the COVID-19 pandemic had on her dentistry practice. While I do not excuse the Applicant for unilaterally reducing her spousal support payments, it is quite likely that had a motion to change spousal support been heard, the Court would have likely reduced the quantum of interim spousal support based on her limited ability to pay. c. Pursuant to my Order of March 24, 2022, $150,000 in non-taxable funds from the net proceeds of sale of the Matrimonial Home were paid, which motion arose due to FRO default proceedings.

[39] Combined, the Applicant has paid $300,000 in non-taxable support to the Respondent, and $734,373.73 in taxable spousal support since separation.

[40] The Applicant argues that the payments she has made far exceed the lifetime support obligation she would owe to the Respondent, based on her 2010 income from the date of separation. DivorceMate calculations based on the parties’ 2010 incomes, with the Applicant’s end-date for spousal support at her retirement age of 65 result in after-tax cost of low-range support of $456,319, and high range support of $608,510. The Applicant has far exceeded her lifetime support obligation to the Respondent. Therefore, any retroactive claim is without merit based on the parties 2010 incomes.

[41] Particularly for long term marriages, like this one of 21 years, it is often determined appropriate to use the parties’ current income at the time of trial when determining spousal support at trial: C. Rogerson, R. Thomson, Spousal Support Advisory Guidelines, Chapter 14.3, p. 144 -145. However, I am mindful that I am not dealing with the Respondent’s on-going claim for spousal support; I am only resolving any retroactive claim. Furthermore, in this case, there was little evidence of the Respondent assuming primary childcare responsibilities. It was not a traditional marriage. Therefore, the rationale for passing on to the support recipient the payor’s post-separation income increase has little application.

[42] Although for certainty, using DivorceMate calculations based on the Applicant’s current (2023) income of $348,565, and an imputed income to the Respondent of $45,000, [2] results in the Respondent receiving a lump-sum after-tax spousal support benefit of $1,166,011 at the low range and $1,494,359 at the high range: see attached DivorceMate calculations. The Applicant has paid over $1,030,000 in spousal support, of which $300,000 was not taxable. This amount approaches, if not exceeds, the full life-time support that the Applicant would ever have to pay to the Respondent based on her 2023 income. This amount assumes the Respondent would be entitled to receive support until the Applicant turns 65 in 9 years from now, but since the Respondent’s pleadings were struck, there is no claim before this court for on-going support after 2022.

[43] Furthermore, none of these figures consider the Respondent’s retroactive child support and s. 7 expenses obligations to the Applicant. The Applicant’s evidence was that the children’s s. 7 expenses alone totalled at least $78,830.81, for which the Respondent would have had a proportionate responsibility. This does not factor in the Respondent’s retroactive child support obligation.

[44] And finally, even if I were to disregard the substantial evidence that the Applicant has overpaid her retroactive spousal support obligation (if not her on-going support obligations), the Respondent’s failure to provide proof of his job search efforts, his failure to provide proof of any medical condition that prevented him from working, and his failure to provide any child support for his children, in my view, disentitle him from collecting any retroactive amount of spousal support that may be owing to him.

[45] The Applicant is not seeking a retroactive child support order, provided the Respondent’s claim for spousal support is dismissed. In my view, this is a more-than-fair result for the Respondent.

[46] For these reasons, I make the following Orders:

a. All retroactive arrears of child and spousal support payable by either party to the other shall be rescinded and set at $0.00.

Issue 4: Divorce

[47] I am satisfied that the parties have been separated for over a year with no chance of reconciliation. The children are now adults and there is no requirement to demonstrate that support arrangements are in place for their care. The statutory requirements for a divorce under the Divorce Act are met. The Applicant shall file an Affidavit for Divorce, attaching the parties’ marriage certificate, and the divorce shall be determined on an uncontested basis.

Issue 5: Costs

[48] Parties consented to the Court making a summary determination of costs for this uncontested trial, based on the parties’ Offers to Settle and Bills of Costs. I have reviewed same.

[49] The Applicant was successful at trial and is presumptively entitled to costs. She was entirely successful in the relief she sought, except this Court was unable to rule on whether the Respondent was entitled to on-going spousal support. Under rule 18(14) of the Family Law Rules, the Applicant is entitled to costs on a full recovery basis from the date of the Offer, in this case, October 11, 2023.

[50] The Applicant incurred costs in preparing for this uncontested trial from November 2022, nearly a year in advance of the Applicant’s Offer to Settle. The Bill of Costs shows full indemnity costs since November 2022 totalling $41,965.38 and $445 in disbursements. While the quality of the written material was excellent, it was excessive in my view. For example, it was not necessary to prepare both written and oral closing arguments. There was also one adjournment that was not the fault of the Applicant.

[51] The Respondent did not upload an Offer to Settle. The Respondent’s Bill of Costs totals $18,853, which is far less, however, the Respondent was not permitted to file evidence. The Applicant was required to deliver affidavit material.

[52] The modern rules respecting costs aim to foster the following four fundamental purposes: (a) to partially indemnify successful litigants for the cost of litigation; (b) to encourage settlement; (c) to discourage and sanction inappropriate behaviour by litigants; and (d) to ensure that cases are dealt with justly in accordance with the primary objective of the Family Law Rules set out in Rule 2(2). See: Ryan v. McGregor (1926), 58 O.L.R. 213 (Ont. C.A.), at p. 216; British Columbia (Minister of Forests) v. Okanagan Indian Band, 2003 SCC 71, [2003] 3 S.C.R. 371 (S.C.C.); Fong v. Chan, 1999 CarswellOnt 3955, 181 D.L.R. (4th) 614, 46 O.R. (3d) 330 (C.A.); Serra v. Serra, 2009 ONCA 395 (C.A.) and Mattina v. Mattina, 2018 ONCA 867 (C.A.)).

[53] When fixing costs, “the costs award should reflect what the court views as a fair and reasonable amount that should be paid by the unsuccessful parties rather than any exact measure of the actual costs to the successful party.” See Zesta Engineering Ltd. v. Cloutier at para 4, cited with approval in Boucher v. Public Accountants Council for the Province of Ontario at para 24.

[54] Having considered these factors, and the factors under rule 24 of the Family Law Rules, I order the Respondent to pay the Applicant’s costs of this Application, fixed in the amount of $30,000, payable within 30 days.

Justice M. Sharma

Date: February 2, 2024

Footnotes

[1] A $20,000 RRSP of the Respondent was used towards the downpayment of the home, but the evidence was that these funds were provided solely by the Applicant.

[2] The Respondent failed to deliver evidence of his job search efforts or evidence supporting why he was unable to work. I find that it is reasonable to impute an income to him of at least $45,000, as there was evidence of him being employed at one point and earning between $40,000 and $50,000.