H.B. v. A.B., 2012 ABQB 364

Court of Queen ’ s Bench of Alberta Citation: H.B. v. A.B., 2012 ABQB 364 Date: 20120604 Docket: 4801 123064 Registry: Calgary Between: H.B. Plaintiff - and - A.B. Defendant _______________________________________________________ Memorandum of Decision of the Honourable Mr. Justice W.P. Sullivan _______________________________________________________ Background [ 1 ] The parties were married on April 4, 1980 in Ankara, Turkey. After 24 years of co-habitation they separated on the 25 th day of December, 2004 at Calgary, Alberta. There are four children of the marriage.

The first three children were born on the same day, July 18, 1995. The fourth child was born on February 23, 2000. In July of this year, the older three will be 17 and the youngest child will be 12 years old. All the children (except one) live with their mother. One of the triplets has “run away” and is residing in the home of a friend. The marriage was difficult. [ 2 ] On the 10 th of April 2006, a Justice of this Court ordered the mother to have sole interim custody of the children of the marriage. The father, Defendant is a successful engineer.

The mother has never worked outside of the home and since separation, she has remarried and lives with her new husband. The mother and new husband are completely dependent on the Defendant for all their regular income. The children are completely dependant on the Defendant for financial support.

Issues: 1) Child Support 2) Spousal Support 3) Matrimonial Property Matrimonial Property [ 3 ] The Defendant not only being a successful engineer, has also been a successful investor and has built up a significant estate for the parties. The parties own two homes , assets of the marriage, both of which are in his name. The Defendant has proposed that the home in Scenic Acres be transferred to the Plaintiff for her sole use and benefit alone. In exchange he will receive the home in which he resides in Silver Spring free and clear of any dower or claim of the Plaintiff.

In her submissions, Counsel for the Plaintiff requested that occur, and I agree. [ 4 ] On the 28 th of September, 2006, a Justice of this Court ordered on the application of the Plaintiff Wife and on noting that the Guideline Income for the Defendant was $244,557.00 that: 1) The Defendant shall pay to the Plaintiff support for the children in the amount of $5,000 per month in base child support; he shall pay $500.00 per month for orthodontist expense, if any; he will maintain the children on his medical and dental benefits plan; he will pay 84% of any other s.7 expense. 2) The Defendant shall pay to the Plaintiff by way of spousal support for herself, the amount of $4,000.00 per month retroactive to January 1, 2005. [ 5 ] On the 5 th of April, 2007, a justice of this Court ordered that the Defendant shall transfer to the Plaintiff mother, half of the net market value, as of the 5 th of April, 2007, of the entire investment portfolio by April 20, 2007.

That order was carried out. The split to the Plaintiff was approximately $1,702,692.00 out of a total amount of $3,242,314. Unfortunately, the order of the 5 th of April did not account for tax liabilities and resulted in this unequal distribution. [ 6 ] In a “spread sheet” prepared by the Defendant, that I find reliable, for the purposes of making argument in these proceedings and relying on the documentation filed throughout the course of the proceedings before the Court, the Defendant has done a “before tax value” and finds that the total before tax value of the assets was $4,094,852.00.

An equal split of that would be $2,047,427.00 more or less each. The net after tax value of the property to be divided was $3,242,314.00. On an after tax split, both parties should have received $1,621,157.00. However, that did not happen and the net result to the Defendant was $1,539,622.00 and to the Plaintiff $1,702,692.00. The unequal split therefore resulted in the Plaintiff receiving an amount of $81,535 that should have been paid to the Defendant.

A Tax Expert called by the Plaintiff confirmed, in cross-examination that in preparing his materials regarding the division he was using before tax account values which raised the problem identified above. [ 7 ] Therefore, with respect to property issues, I find that the exchange of the two residential properties held by the parties as directed above is fair in all the circumstances and the award of $81,535 to the Defendant will equalize the distribution of the stock and other property held by the parties on an after tax basis.

I will deal with pensions below under Spousal Support, and adjust for the $81,535 in the Conclusion. Spousal Support [ 8 ] The law was clearly set by Mr. Justice Graesser in Thomson v. Thomson , 2011 ABQB 501 :

14 It is certainly appropriate to consider the division in matrimonial property in the context of spousal support, as assets or debtfeature in the needs of the parties and their ability to pay. [9] Justice Graesser then went on to set out the law: 15 S. 15.2 of the Divorce Act states:

(4) In making an order under subsection (1) or an interim order under subsection (2), the court shall take into consideration thecondition, means, needs and other circumstances of each spouse, including 1.(

a) the length of time the spouses cohabited; (

b) the functions performed by each spouse during cohabitation; and (

c) any order, agreement or arrangement relating to support of either spouse.

(5) In making an order under subsection (1) or an interim order under subsection (2), the court shall not take into consideration anymisconduct of a spouse in relation to the marriage.

(6) An order made under subsection (1) or an interim order made under subsection (2) that provides for the support of a spouseshould (

a) recognize any economic advantages or disadvantages to the spouses arising from the marriage or its breakdown; (

b) apportion between the spouses any financial consequences arising from the care of any child of the marriage over and above anyobligation for the support of any child of the marriage; (

c) relieve any economic hardship of the spousesarising from the breakdown of the marriage; and (

d) in so far as practicable, promote the economic self-sufficiency of each spouse within a reasonable period of time. 16 There is no dispute on the law in this area. 17 As noted in Shields v. Shields, 2008 ABCA 213 at paras. 19 - 21: [19] In Moge v.

Moge, (SCC), [1992] 3 S.C.R. 813 at para. 77, the Supreme Court of Canada recognized the importanceof the presiding judge's discretion and the difficulty of setting down principles that would guide every case: The four objectives set out in the Act can be viewed as an attempt to achieve an equitable sharing of the economic consequences ofmarriage or marriage breakdown. At the end of the day however, courts have an overriding discretion and the exercise of such discretionwill depend on the particular facts of each case, having regard to the factors and objectives designated in the Act.

[20] In Moge , the court made three general observations: the distinction between "traditional" and "modern" marriages is not very useful; the support provisions of the Divorce Act are intended to deal with the economic consequences for both parties of the marriage or its breakdown; and what the Divorce Act requires is a fair and equitable distribution of resources to alleviate the economic consequences of marriage or marriage breakdown for both spouses. [21] The crucial issue is to find the right balance and then exercise discretion in making an award.

As McLachlin J. (as she then was) said in Moge at para. 107 : ...the judge's task under...the statute is to make an order which provides compensation for marital contributions and sacrifices, which takes into account financial consequences of looking after children of the marriage, which relieves against need induced by the separation, and, to the extent it may be "practicable," promotes the economic self-sufficiency of each spouse. Neither a "compensation model" nor a "self-sufficiency model" captures the full content of the section, though both may be relevant to the judge's decision.

The judge must base her decision on a number of factors: compensation, child care, post-separation need, and the goal, insofar as practicable, of promoting economic self-sufficiency. 18 The Court of Appeal continued at paras. 30 - 31: [30] The Divorce Act dictates that the amount and duration of spousal support shall be determined taking into consideration the condition, means, needs and other circumstances of each spouse.

While the recognition of any economic advantage or disadvantage arising from the marriage or its breakdown remains an overall objective to be considered by the court, that objective cannot dictate a result which guarantees that the payee spouse must support the other spouse ad infinitum. The Divorce Act does not require that spouses' incomes be equalized to alleviate economic disadvantage arising out of the roles adopted by the parties in the marriage.

Instead, the amount of support should be determined by the factors set out in the Divorce Act and interpreted in Moge . [31] According to Moge, a judge is required to consider the parties' circumstances, including the duration of the marriage, their ages, their incomes and prospective incomes, the effects of property equalization, the stages of their careers, the marital standard of living, participation in household responsibilities, childcare obligations, and the parties' reasonable standard of living expectations. [ 10 ] It appears from all of the evidence before me that the Plaintiff is a poor administrator of her financial resources.

Having recently received a very substantial division of matrimonial property, she is in financial difficulty today. She resides in a home carrying significant debt that she purchased in south Calgary after vacating the home in Scenic Acres after this home underwent significant renovations at substantial cost. She is the sole support for her husband. She owns expensive motor vehicles and has bought and sold a very expensive recreational vehicle. [ 11 ] The cash assets of the Plaintiff are essentially gone.

Although fair argument can be made that some of the cash has been converted into a down payment of the home that she currently resides in and there is equity in both homes to which she will have title after Judgement. Notwithstanding that, her expenses show an elaborate lifestyle to which she was not accustomed prior to separation. House expenses, on the new home alone, according to her monthly budget

summary are $3,220.42; utilities $775.00; home care is $410.00; communication and technology costs are $561.00 per month; insurance expenses for herself are $2,115.25. Included in that amount is a charge of $1,816.25 per month alone for her life insurance policy. Before we get to any further expenses, those items alone total $7,081.00 per month. [ 12 ] Her automobile costs she states are $908.00 per month; food is $1,900.00 per month and she has bank charges of $750.00 per month.

She wants to save $425.00 per month for vacations. [ 13 ] As a result of her spending habits, the Plaintiff has essentially destroyed an income producing asset of the marriage, the investment portfolio.

With a 4% return either by way of dividend or capital gain, most likely dividend and proper management and investment strategies, one could expect that the Plaintiff would receive approximately $64,000 per year of income. [ 14 ] In the order of September 28, 2006, Madam Justice Rawlins ordered, after noting that the guideline income for the Defendant is $244,557.00, spousal support in the amount of $4,000.00 per month for a total of $48,000.00 per year. These two numbers, deemed

investment returns and spousal support, would give the Plaintiff income in excess of $100,000 per year for her support and give hersecurity with respect to long-term income after the Defendant retires. I do not find the award of 4% interest to be unreasonable and notethat this is the amount that Justice Rawlins used in calculating interest on the arrears of spousal support owned for the year 2005 by theDefendant to the Plaintiff. Although the 4% figure is somewhat arbitrary it is not unrealistically high or low (see: Lane v.

Lane, 12 ABCA2.) [15] In addition to this amount, the Plaintiff receives for the benefit for her entire family group, the sum of $5,000.00 per month taxfree in child support which results in the family unit of which the Plaintiff is a member having, on these calculations, in excess of$160,000 per year gross income.

A substantial portion of that being tax-free. [16] It is to be remembered that the life-style currently enjoyed by the Plaintiff greatly exceeds the frugal lifestyle that her and theDefendant lived while they were together for nearly a quarter century. [17] I accept and find that the Plaintiff is unable to work and will not likely ever gain meaningful employment. It is reasonable andfair to assume that her chance of meaningful employment is zero. I find that she is therefore entitled to long-term spousal support. Thequestion becomes is how is this to be calculated?

Her new husband does not work as a simple matter of choice and is dependent upon hercompletely. He does not contribute anything to the household expense. There has already been a division of matrimonial property. TheDefendant has maintained his portfolio and is current with respect to his ordered child and spousal support payments. The Plaintiffrequests and urges the Court to impute into income for spousal support calculation, any income deemed or actually realized from hisshare of the matrimonial property. I am satisfied that this would be “double dipping”.

The Plaintiff has already received in excess of halfof the matrimonial property and has essentially spent it - and now wants a share of the income from his half of the matrimonial propertythat he has not disposed of. Double Dipping [18] The wife has alleged in her claim and through her evidence that the Defendant’s income for his investments should be used inthe calculation of spousal support. On these facts, this is sometimes referred to as “double dipping”. In Boston v. Boston Supreme Courtof Canada 2001 SCC 43 , [2001] 2 S.C.R. 413 2001: 1.

"Double recovery" or "double dipping" are terms that have come to describe the situation where, after an equal division of assetson marriage breakdown, one spouse claims continued support from the previously divided or equalized assets of the other spouse. Thisusually arises, as here, when a pension is involved. ... 3. When a pension changes from an asset into income the "double recovery" difficulty can arise, usually in the following way. Onmarriage dissolution, the parties equalize the matrimonial assets.

The pension-holding spouse (the husband in this appeal) must includethe future right to his pension as part of his net family property. For the husband to retain his pension, the payee spouse (the wife in thisappeal) must get other assets of the same value, in order to equalize their net family property. While the husband is still employed, hemay be obliged to make spousal support payments to the wife.

When he retires, however, and his pension comes into pay, the wife issaid to be making a double recovery if she continues to receive spousal support from the husband's pension income, as she receivedassets equal to the capital value of the pension at the time of settlement. If support payments from the pension are maintained, she iscollecting twice from the same source. ... 34 The term "double recovery" is used to describe the situation where a pension, once equalized as property, is also treated as incomefrom which the pension-holding spouse (here the husband) must make spousal support payments.

Expressed another way, upon marriagedissolution the payee spouse (here the wife) receives assets and an equalization payment that take into account the capital value of thehusband's future pension income. If she later shares in the pension income as spousal support when the pension is in pay after thehusband has retired, the wife can be said to be recovering twice from the pension: first at the time of the equalization of assets and againas support from the pension income.

35 Double recovery appears inherently unfair in cases where, to a large extent, the division or equalization of assets has addressedthe compensation required. [19] It is important that the Court avoid double recovery (see Czutrin, J. in Shadbolt v. Shadbolt (1997) (ON SC), 32 R.F.L. (4th) 253 and see Lewis v. Lewis, 2009 ABQB 539): [15] It is important that in arriving [at] a conclusion in these type of cases, that the Court fairly avoid double recovery In this case Mr.Lewis transferred to Mrs. Lewis one half of his pension, on his retirement she collects that pension. It’s been equalized.

Her nominalamount of pension per month is exactly the same as his. A further distribution to her from his pension would be grossly unfair. This wasclearly stated by Mr. Justice Major in paragraph 56 of his decision: However, where the payee spouse received assets on equalization in exchange for a part of her former spouse’s pension entitlement, shemust use those assets in a reasonable attempt to generate income at least by the time the pension starts to pay out. The reason for thisrequirement is clear.

The payee spouse cannot save the assets that she received upon equalization and choose instead to live on theliquidation of the payor spouse’s pension when he retires. If she were permitted to do so, the payee spouse would accumulate an estatewhile the payor spouse’s estate is liquidating. [16] In conclusion, as Justice Major stated in paragraph 75: It would be inequitable in this case to allow the wife to reap the benefit of the pension first on the division of assets and again as a sourceof income.

The wife received capital assets on equalization which she is saving and accumulating presumably for her beneficiaries. Bycontrast, the husband’s only tangible asset, his pension, is diminishing. [20] In this case the parties have lived a lifestyle that has resulted in the accumulation of significant assets. I am satisfied that aslong as the Defendant continues to work he will continue to pay spousal support as ordered by this Court in 2006 to the Plaintiff in theamount of $4,000.00 per month. In arriving at this number I have considered the amounts that would be payable under the Spousal Support Guidelines.

I am satisfied that a strict application of these guidelines would be unfair. The Defendant is approaching his 67th year and not in great health. The Plaintiff has been left with significant sources for producing income which she does not utilize tosupport her standard of living. Her current standard of living is well above the standard the parties endured for the bulk - in fact for all oftheir marriage. She has not invested her capital assets in an income producing investment. Of course, when he ceases to work, there willbe an equal division of his earned pension income.

This equalizes the position of the parties. Retirement [21] The Defendant is nearing his 67th year and is not well. This trial had to be adjourned while he attended for a lengthy series ofcancer treatments. He has worked hard and amassed a significant fortune to the benefit of the Plaintiff. He has passed the normalretirement age and the project at his employment that he is working on will soon be coming to an end. [22] As I stated in Lewis v.

Lewis, 2009 ABQB 539: The decision of when to retire from a life-long career is a personal matter into which the Court should not interfere without exceptionalcircumstances. Given the Husband no longer has children of the marriage to support, has provided all spousal support payments thus farrequired, and entered a settlement of matrimonial property far more favourable to the Respondent than himself, there is nothing to justifythe Court’s review of this Applicant’s decision. [23] Although the Defendant has no clear intention to retire that I can identify at the present time he expresses the desire to have

the ability to retire. Should the decision to retire on the part of the Defendant in the near future be considered reasonable? The Payor Defendant has been employed in a stressful job for many years. He has worked tirelessly and has amassed a significant fortune for the parties. The Plaintiff takes the position that because the children came into the life of the parties late, that the Defendant has a requirement therefore to continue working well beyond what might be considered the normal retirement age.

In all of the circumstances of this case, notwithstanding the age of the children, I am satisfied that the Defendant may retire at a time convenient to him and I am not prepared to impute an income to him, for spousal support, other than the actual income that he receives when he is in retirement. Therefore, until retirement, the Defendant will continue to pay the amount ordered ($4,000.00 per month) with respect to spousal support and upon his retirement, he will split his earned pension income 50/50 with the Plaintiff.

This specifically excludes the calculation of any income from any investment from his share of the matrimonial property. This for example will include a 50/50 split for the NEXEN pension and the Unical/Chevron Pension. [ 24 ] The Plaintiff indicates and asserts that her husband is retiring to thwart her attempts to obtain further spousal support.

There is nothing in the evidence that I can find to give credence to this belief although the result may in fact be what she fears, a reduction in spousal support, although the pension income to her will be significant. [ 25 ] The husband has significant financial assets that he and his wife have shared. He has saved his financial resource whereas his wife to some extent at least squandered them. Any further analysis of the husband’s decision to retire in the near future in unwarranted if in fact that is what he decides to do.

Transfer of Funds [ 26 ] The Plaintiff has made an allegation that substantial funds have been transferred from Canada to the Defendant’s family in Turkey. She has been unable to identify any specific amount or any amount. In argument after the evidence was completed, the Defendant admitted that he transferred over the years up to an amount approximating $800.00 per month to various family members in Turkey for their support. This would be consistent with the Plaintiff’s understanding that funds had been transferred.

Therefore I accept that funds have been transferred to the Defendant’s family in Turkey, but not to such an amount as would call on the court to make an adjustment in favour of the Plaintiff. In any given year, this amount might total $10,000 which would be less than 5% of his employment income. In any event, the transfer of this amount has not affected his ability to pay spousal and child support nor has it affected his ability to earn and maintain a substantial estate for the parties.

There will be no adjustment for this amount, and I find the amounts to be reasonable in the circumstances and were known to the Plaintiff during the marriage. [ 27 ] In this case, the wife has purchased for herself and for the benefit of her four children, a very expensive life insurance policy that costs $1,816.00 per month. This is a very significant expense and in the circumstances of the case not warranted when the mother of the children has significant assets that properly managed will create an estate for her children. She is also the owner of two residences.

One luxury home rented out wherein the rent does not cover the expenses on a monthly basis. This is an unnecessary expense and burden and should not be part of the responsibility of her ex-husband. [ 28 ] I am not satisfied on review of the evidence that there has been any dissipation of the assets by the Defendant. In fact I find it is the opposite. The Defendant has done a noteworthy job of securing a substantial asset for both parties. Child Support [ 29 ] In determining the actual income of the Defendant for the period of 2004 to 2011, it is important to consider the actual earned income of the Defendant.

For example in the year 2006, his total Line 150 income is $457,646.00, however, that amount includes $12,000.00 for dividend gross-up which was not realized, does not calculate interest expense to earn income, and does not calculate income due to options and other benefits in the amount of $137,745.00 which were deemed as income to him as being granted in the year 2006 but were not then and are not now realizable as the options have no value in today’s market.

The total adjustment therefore for the year 2006 would be $176,920.00 leaving an adjusted income of $280,727.00. [ 30 ] On review of a detailed income analysis, the only one that was prepared for the Court, it appears that all of the calculations that the Defendant has made are accurate so therefore I find that his income for the years 2004 through to 2011 total income adjusted is as follows:

2004 2005 2006 2007 2008 2009 2010 2011 213,461 217,644 280,727 256,559 257,457 283,776 266,991 293,909 [ 31 ] Based on these numbers, I find that the child support payable is as follows up to and including 2011: 2004 2005 2006 2007 2008 2009 2010 2011 $4,508 $4,592 $5,854 $5,370 $5,388 $5,915 $5,579 $6,117 [ 32 ] Therefore in total, the Defendant is in arrears with respect to child support in the amount of $39,869.00 the Defendant agrees and admits that this amount is owing.

In fact, these are his calculation of arrears of child support and I so find. [ 33 ] For ongoing child support the Defendant will pay child support for three children as calculated in the child support tables. Unfortunately, one of the triplets as I have mentioned above has left the home of his mother and is self supporting. In calculating the child support payable all income is to be included in arriving at his “Line 150". This of course will include income from his share of the division of matrimonial property. [ 34 ] I am not satisfied that the Plaintiff is capable of proper financial planning and management.

Therefore the amount payable for child support arrears shall be paid into an existing RESP by the payor, within 30 days. [ 35 ] On the 24 th of June, 2009, this Court ordered that there be a parenting and psychological assessment of both parties completed by Dr. Roger Holden. It was a term of the order that “the Plaintiff shall be responsible for initial payment of Dr. Roger Holden for his assessment. [ 36 ] I am also satisfied on the evidence I heard, in my observation of him and on review of the file, that he cares for and loves his children deeply.

I am not satisfied that there is evidence before me upon which I could find that there was any intent on the part of the Defendant to flee the jurisdiction with his assets. In any event, the pensions payable to the Defendant are payable in Canada. [ 37 ] I find that there are no arrears owing for spousal support. The earlier Court Order was reasonable in the totality of the circumstances. [ 38 ] This leads the amount owing with respect to the unequal pre-taxed distribution of the stock portfolio of the parties the sum of $81,535.00.

This amount is a debt between the parties and cannot be offset against child support. The Defendant has agreed to pay one- half of the assessment report prepared by Dr. Roger Holden in the amount of $13,000.00. That amount will be deducted from the $81,535.00 leaving an amount owing of $63,535.00 from the Plaintiff to the Defendant. This will be a charge on the title to the Scenic Acres home until paid or may be offset as agreed between the parties. Heard on the 16 th day of May, 2012. Dated at the City of Calgary, Alberta this 4 th day of June, 2012.

W.P. Sullivan J.C.Q.B.A. Appearances: Linda V. Goold for the Plaintiff Self Represented Defendant