Fraser v. Fraser, 2012 ABQB 660

Court of Queen ’ s Bench of Alberta Citation: Fraser v. Fraser, 2012 ABQB 660 Date: 20121029 Docket: 4803 156307 Registry: Edmonton Between: George David Fraser Plaintiff - and - Judith Gail Fraser Defendant _______________________________________________________ Reasons for Judgment of the Honourable Mr.

Justice Donald Lee _______________________________________________________ Introduction [ 1 ] This is an application for interim spousal support in the sum of $11,800.00 per month; interim costs of $30,000.00; and the distribution of $20,000.00 being the wife ’ s share from the sale proceeds of the former matrimonial home pursuant to an equal distribution agreement made between the Parties. [ 2 ] The husband opposes all aspects of the wife ’ s request arguing that there has been no material change since the wife voluntarily agreed to receiving $3,000.00 per month is spousal support in March 2011; the wife has delayed this matter coming to trial;

and regarding the agreement to distribute the $40,000.00 sales proceeds, that it is the subject of a subsequent consent order between the parties holding it in trust for the valuator ’ s expenses. [ 3 ] These parties were married in September 1983, a long term marriage of 29 years. The Parties have four adult children, one of whom remains a child of the marriage born in 1991, who is presently attending a university and residing with the husband. [ 4 ] The parties separated in July 2012 at which time they resided in Sherwood Park, Alberta. Both parties continue to reside in Sherwood Park.

During the marriage in approximately 1983 the Parties together with others founded Garnet Instruments Ltd. ( “ Garnet ” ). The Parties presently hold approximately 53% of the shares of Garnet. A subsidiary corporation Garnet Technologies Ltd. was also incorporated by the Parties with other business partners. [ 5 ] The husband is employed by Garnet as its Chief Executive Officer, and he had employment income of $757,739.00 in 2011. The wife is employed as a social worker with the Alberta Government and has employment income of$49,000 in 2011, $6,000 of which was paid by Garnet but which payments have now ended.

Pursuant to an Interim Spousal Support Agreement dated March 14, 2011 the wife also received in 2011 additional interim spousal support of $30,000.00 paid to her at a rate of $3,000 per month commencing on March 15, 2011, which continues indefinitely. Analysis [ 6 ] With respect to whether the wife is entitled to receive interim spousal support, the Divorce Act , s. 15, recognizes that spousal support requires an assessment by the Court of the economic advantages or disadvantages to the spouses arising from the marriage or its breakdown.

It also requires the Court to apportion between the spouses financial consequences arising from the care of any child of the marriage and to address any economic hardship of the spouses arising from the breakdown of the marriage. The Court is also required to promote the economic self-sufficiency of each spouse within a reasonable period of time, so far as is practicable. [ 7 ] The wife has suffered significant economic disadvantages as a result of the marriage and its breakdown. She stepped aside from her career while one of the children was in high school to assist him with his learning issues.

This was with the agreement of the husband. This hiatus resulted in a loss of seniority earned to that date. [ 8 ] The wife built her career around the family in order to allow the husband to focus his efforts on the advancement of Garnet, which resulted in a choice to work part-time throughout the marriage. [ 9 ] As to economic hardship, the parties worked throughout their marriage to build Garnet into the successful corporation that it has become.

Their financial resources were contributed to Garnet, as evidenced by the 2006 mortgage that enabled them to purchase additional shares in the business to maintain a control position.

As the equity in the matrimonial home was limited at the time of the marriage breakdown due to this investment, and because of the refusal by the husband to comply with the agreement to distribute those proceeds after the home was sold, the wife has been left with no capital to secure a residence, to purchase a better vehicle of to enjoy leisure activities. [ 10 ] On the other hand the husband apparently unlimited discretion to advance money to himself from Garnet, he has acquired and renovated a new residence (which he purchased from his new adult interdependent partner and her estranged spouse), purchased three vehicles tor himself, all of which are recent model Mercedes, and has gone on numerous vacations, often with extended family of his new adult interdependent partner.

He also invested $155,000.00 in the construction of a new home for himself, in addition to the house that he purchased to live in. [ 11 ] Apparently the husband has also paid off over $80,000.00 in credit accounts that had been accumulated by the Parties to assist his now adult interdependent partner with her business. He confirmed in Questioning that he continues to support that same business, even though he is of the view that the $105,000.00 contributed by the husband and wife to support that enterprise prior to their separation is not recoverable.

[ 12 ] Since November 2010, it is reported that the husband has taken at least twelve vacations, often with more than one other person, including trips to Palm Springs, Las Vegas, Florida and Hawaii. [ 13 ] At the recent Questioning of the husband on his affidavit he acknowledged he contributed $67,000.00 to the purchase of a residence for one of the adult children of the marriage, as well as paid $15,000.00 to pay off her car loan. [ 14 ] Given the foregoing, together with the length of the marriage, the relative ages of the parties (the wife is 54 at present while the husband is 51), and the disparity in income, I conclude that there is clear entitlement to spousal support.

What support should be paid? [ 15 ] The budget provided by the wife indicates that in order to allow her to acquire a new residence and vehicle, as well as furniture for the new residence, and to maintain a moderate lifestyle, whilst saving towards retirement and paying her legal fees, she would require $17,166.96 per month. Assuming that she is awarded interim costs, as requested, that would reduce the budgetary requirements to $14,666.96 as her budget provides for $2,500.00 per month for legal fees.

After deducting her average net income from Alberta Health Services of approximately $2,865.00 per month, the short fall required to meet her budgetary needs is $11,801.96 per month. [ 16 ] Without taking into account the shareholder's loan advances from Garnet to the husband in 2011, his monthly gross income was $63,083.33 per month. He also withdrew an average of $17,666.67 per month from his shareholder's loan account. [ 17 ] In 2012, the husband has been paid the sum of $506,543.00 by Garnet to the end of September. His average monthly income has been $56,282.56.

In addition, he has withdrawn additional amounts from his shareholder's loan account, totalling $30,000.00. [ 18 ] The husband ’ s budget indicates that he presently requires $17, 357.94 per month to maintain his share of the household expenses. The husband has excess income per month of $41,424.32, when his withdrawals from his shareholder's loan account are taken into consideration.

It is suggested that the husband will not be economically disadvantaged by the payment of interim spousal support in the sum of approximately $12,000.00 per month. [ 19 ] The Spousal Support Advisory Guidelines ("SSAG") suggest that support should range from $22,337.00 to $29,782.00 if only the 2011 Line150 income was taken into consideration. [ 20 ] Utilizing the 2011 Line150 income ($757,739.00), the 2010 Line150 income ($266,294.00) and the 2009 Line150 income ($254,400.00), the husband has a 3 year average income of $426,144.33.

Based on this income, the SSAG suggest a range of support between $11,816.00 and $15,755.00. [ 21 ] It is noted that the 3 year average calculated above is considerably lower than the husband ’ s 3 year average would be if his year-to-date 2012 income is taken into account. Based on his income to date in 2012, it appears that he may earn as much as $675,390.67 in 2012, which would make his 3 year average income equal to $566,474.53. [ 22 ] The economic advantage being enjoyed by the husband is based primarily on his control of matrimonial assets, namely the controlling interest in Garnet.

He confirmed in Questioning that he has, in his view, the ability to take whatever salary and bonuses he wishes from Garnet, without the requirement of a directors' resolution. Certainly he confirmed that there are no such directors' resolutions in existence. Until there is a resolution of the matrimonial property issues, this advantage will continue, unless addressed by an application to relieve against oppression pursuant to the Alberta Business Corporations Act . [ 23 ] It is also noted that the husband ’ s recent use of corporate assets by the husband and the vast increase in income paid to him

by Garnet is contemporaneous with the breakdown of the marriage and the establishment by the husband of a new interdependent adult relationship.

The pattern of salary increases and the limited use of corporate resources to fund the parties' lifestyle prior to separation is clear from the fact that a substantial portion of the equity in the former matrimonial home was encumbered to allow them to purchase additional shares in Garnet, whilst the year-to-year percentage increases in salary paid to the husband between 2008 and 2010, the year in which the parties separated, are 5.16% and 4.67% respectively, whilst the increase between 2010 and 2011 amounts to184.55%.

Is an award of interim costs appropriate, and if so, in what amount? [ 24 ] The husband argues that an award of interim costs is unnecessary given that he, and not the wife, has been pursuing this matter to completion; and that he has simply been redistributing/rearranging the capital of the company to accommodate the economic realities of his present new personal situation. [ 25 ] The better view however is that the significant economic advantage enjoyed by the husband justifies an award of interim costs. The wife needs to address various issues and will need to contribute to the valuation expenses.

Further she has limited resources to respond to applications by the husband, as noted in the case of the consent order that resulted in the house proceeds being retained in trust. The wife needs to be able to pay for competent counsel to effectively complete the outstanding matters still to be resolved in this complex case. Should the sale proceeds for the former matrimonial home now be distributed equally to the parties? [ 26 ] The parties agreed that the proceeds of the former matrimonial home should be distributed equally in the agreement signed on March 14, 2011.

Subsequently a consent order was drafted by counsel for the husband that purported to vary the terms of the agreement by requiring the proceeds, which total approximately $40,000.00 to be held in trust. Previous counsel for the wife failed to object to this provision, and counsel for the husband has maintained his refusal to allow for the final distribution continuously since. [ 27 ] The refusal to disburse the net proceeds is, in the wife ’ s submission, both mean spirited and vindictive, especially in light of the significant difference in the position of the parties economically.

The husband has been able to be profligate in his spending, lifestyle and utilization of the capital of the parties, whilst preventing the wife from access to the sole matrimonial asset that would have provided any capital to her, even to the extent of $20,000.00.

Conclusion [ 28 ] The husband ’ s position is given the existing interim arrangements made between the Parties on March 14, 2011 with respect to partial matrimonial property and interim spousal support, and given that there had been no change in circumstance since that time which would warrant an increase in spousal support, that the wife ’ s application for significantly increased spousal support should be denied.

Furthermore the husband submits that the wife ’ s application for interim costs should not be granted in the circumstances given that the delays in the process have been in spite of the efforts of the husband to move the proceedings along, and given that significant progress has been made on the primary issue which is the pending completion of the valuation of Garnet. [ 29 ] Finally the husband submits that notwithstanding that the sales proceeds for the residence in Sherwood Park were to be distributed equally to the Parties pursuant to the March 14, 2011 agreement, a subsequent Consent Order drafted by counsel for the husband was consented to by the wife ’ s counsel valued the terms of agreement which required that $40,000.00 in total be held in trust.

Since previous counsel for the wife failed to object to this provision, and it is now the subject of a Consent Order that was never appealed, the husband maintains his refusal to release $20,000.00 of those sales proceeds to the wife. [ 30 ] With respect to the argument that there has been no change in circumstances that justifies the relief sought by the wife, it is noted that the financial circumstances of the parties and particularly of the husband were substantially different at the time that the

interim agreement as to spousal support was entered into March 2011. While it is acknowledged that this was a consensual agreement, the agreement was predicated on the financial circumstances that the wife was aware of at the time. It was only subsequent to that agreement that it became clear that the husband was using the matrimonial assets of the parties for the financial benefit of himself and his new partner.

I conclude that the use of the matrimonial property in the manner disclosed by the evidence, and the extent to which that property is being used for the benefit of the husband and his new partner, justified the relief sought in this application. [ 31 ] The wife will receive interim spousal support payments of $7,500.00 per month commencing October 1, 2012. [ 32 ] With respect to the valuation of Garnet, the valuation could not proceed without appropriate funding. No agreement was ever reached as to how it would be funded until MNP LLP was retained.

The current valuation is in fact being funded by both pf the parties from the proceeds of the sale of the former matrimonial home. It should also be noted that at no time prior to the negotiation of the Consent Order providing for the valuation did the husband agree to assist in funding the valuation. [ 33 ] The wife will receive interim costs of $30,000.00 to address the numerous steps still needed to be taken to bring this action to trial, and because of the significant economic disadvantage of the wife.

This matter needs to be resolved expeditiously but there are numerous steps to be taken to bring this action to a conclusion. Questioning (except on affidavits) has not been undertaken, nor is the valuation of the corporate shares yet complete.

The wife may need funds to retain her own business valuator to assess the report currently being prepared by MNP LLP, as well as an accountant to assist her with the potential tax consequences of a disposition of her interest in Garnet, assuming that the husband is able to buy out her interest in the capital stock of Garnet. [ 34 ] With respect to the Order granted by my colleague Verville, J. Regarding the net proceeds of the sale of the former matrimonial home, it is conceded that the Order was by consent and was not appealed.

However the Order is subsequent to the agreement dated March 14, 2011 and the Order is in direct contradiction to the consensual agreement between the parties. [ 35 ] Further given that the Order granted by Verville, J. was a Consent Order, the existence of the contradicting “ consensual arrangement ” on matrimonial property would not, in all likelihood, have been brought to his attention.

The Court is not barred from addressing this in light of all the evidence now before it. [ 36 ] I conclude that the wife ’ s share of $20,000.00 still held in trust from the sale of the former matrimonial home should be released immediately to her. Costs [ 37 ] The interim property agreement provides that the party in breach of the agreement would be liable to pay solicitor-client costs to the other party.

It is submitted, in the circumstances, that the costs of this application should be awarded to the wife on that basis, given the long standing refusal of the husband to comply with those terms, whilst using the assets of the couple to facilitate his own vastly enhanced lifestyle. [ 38 ] Costs may be spoken to if necessary by the Parties withing 60 days of the Reasons. Heard on the 24 th day of October, 2012. Dated at the City of Edmonton, Alberta this 26 th day of October, 2012.

Donald Lee J.C.Q.B.A. Appearances: Karin F. Schwab and Andrea Simmons Fraser Milner Casgrain LLP for the Plaintiff Husband Barry M. King Strathcona Law Group for the Defendant Wife