COURT FILE NO.:  FS-09-350354

DATE:  20091202

 

ONTARIO

SUPERIOR COURT OF JUSTICE

FAMILY LAW

 

B E T W E E N:	)
	)
CAROL ANN ELGNER,     Applicant     - and -     CLAUDE FREDERICK ELGNER,     Respondent	) ) ) ) ) ) ) ) ) ) ) ) ) ) )	Julie Hannaford and Golnaz Emam, Counsel for the Applicant               Karon C. Bales, Counsel for the Respondent
	)
	)	HEARD:  NOVEMBER 19, 2009

 

 

ENDORSEMENT:  GREER J.:

 

 

[1]          The parties appeared before me on the Motion of the Applicant, Carol Ann Elgner (“the Wife”), for Temporary Spousal Support to be paid by the Respondent, Claude Frederick Elgner (“the Husband”), and for certain disclosure to be made.  The Husband moved to have the Motion adjourned to allow him time to question the Applicant.  I refused that adjournment for the reasons as set out in an Endorsement released by me.  The Motion was then heard by me.

[2]          The Motion was originally returnable on October 1 and was adjourned to October 20 and was again adjourned to November 19, 2009, when I heard it.  Given the time constraints the parties were under, having only booked a one hour for the Motion, I adjourned that part of the Motion dealing with disclosure to another date to be set by the parties.  We then spent two hours on the Temporary Spousal Support Motion.

Some Background Facts

[3]             The parties separated in June 2007 after thirty-three (33) years of marriage.  The parties had a traditional long-term marriage where the Wife remained at home after the marriage to raise the parties' three (3) children.  Those children are all adults and are 31, 28 and 27 years of age. None remains a child of the marriage for purposes of support.  The Wife is the only dependant in the family.  She is now 61 years of age and the Husband is 62.

[4]          The parties acquired great wealth during their marriage.  More will be said in this Endorsement about the Husband's corporate wealth but his business successes led him and his brother to sell the family business.  This sale led to the accumulation of their great wealth.

[5]          The parties, late in the marriage, took on an elegant lifestyle.  The parties owned the following assets when they separated:

1.                  The matrimonial home in Toronto worth $1,500,000.

2.                  A Muskoka summer residence worth $2,600,000.

3.                  A Florida residence on the Mizner Golf Club development worth $3,500,000.

4.                  A condominium in Whistler, British Columbia.

5.                  Five (5) timeshares in warm climates.

[6]          The parties and their children used these various properties during the marriage.  The parties continue to share the use of the Florida residence and the Husband took over the matrimonial home in Toronto.  Each has purchased a new condominium residence, with both parties spending almost the same amount on his or her new residence, including renovations.

[7]          The Husband, after the sale of his business and while the parties were still married, set up certain Trusts for the Wife and the children.  The Wife's Trust was vested in her and was terminated on her 60^th birthday in July 2008, so she has received the capital from it.  The Wife also received shares in the Husband's personal company, Claude Elgner Holdings Ltd. (CEHL) and she has a 9.9% minority interest in that company.  I am told that this interest is valued at $12,500,000 but cannot be liquidated without being sold.  No buyers have come forward, given that the shares are in a private company controlled by the Husband.

[8]          The Husband has taken a position that much of his wealth is excluded from forming part of his Net Family Property for purposes of Equalization with the Wife.  The Husband has, however, advanced to the Wife the sum of $1,750,000 as an advance on her Equalization payment, to allow her to purchase her new residence and renovate it.  He also transferred his 50% interest in an Oakville condominium to the Wife.

[9]          The Wife, in the meantime, whether prudent or not, purchased two new condominium residences, with one being an investment property, not yet ready for occupation.  The second condominium was bought for the use of the Wife's sister, Janet Merrifield, whom the Wife and her Husband supported while they were still married and living with one another.  The sister has complex medical problems so that she is unable to work and support herself.

The Wife's Assets

[10]      The Husband says that the Wife has received approximately $6,200,000 in cash and investments directly from him.  He says on top of the two amounts noted above that the Wife received, she also received the following amounts:

1.            The sum of $2,100,000 from an equal division of the parties' joint assets in December 2008.

 

2.            The sums of $250,934 and $194,815 in cash as a repayment of a shareholder loan, from her interest in CEHL, on October 27, 2008.

 

3.            The sum of $712,800 in cash as a tax-free capital distribution from CEHL, in December 2008.

 

4.            The sum of $390,307 in cash as a repayment of a loan by the Ben Elgner Family Property trust, in October 2008.

 

5.            The sums of $773,717 cash in three parts from September 2007 to August 2008.

 

The Husband further points to the fact that the Wife's 2008 after-tax income was $775,443.76.  Most of that income, however, came from the CEHL tax-free dividends.  The Husband says that this should be grossed up to get the real amount of income, which he calculates as $1,388,450 pre-tax.

 

The Husband's Assets

 

[11]      The Husband has presented a corporate Chart of his holdings and interests, some of which his brother also has an interest in.  Their business interests started out as a 50% interest in ABC Group Realty Holdings, with the Schmidt family owning the other 50% interest.  When the Elgner interest was sold in 2006, each of the brothers took 50 common shares in a new company called Ben Elgner Holding Ltd. (BEHL).  The Wife says that the Husband received $100,000,000 for his interest in ABC.

[12]      The Husband then set up another new company CEHL, in which he held his 50 new common shares.  He then did an estate freeze, whereby the Trusts for his children and his Wife were set up whereby each held 99 common shares of that new company. It, in turn, held 604 common shares of Claude Elgner Investments Ltd. (CEIL), which in turn was wholly owned by the Husband through his 100 common shares of CEIL.  Finally, the Husband and his brother control Elgner Group Investments Ltd. (EGIL), as their personal holding companies own 50 common shares each of EGIL.  The Husband's personal holding company is CEIL.

[13]      The Husband, through his various corporate interests can completely control what income he receives from those companies he personally controls.  The brother and the Husband control BEHL so must work together in voting what dividends are paid out to them from that company. CEIL holds 50 common shares of EGIL so the Husband and his brother can vote on what dividends, whether tax-free capital dividends or otherwise, are paid to their holding companies.

[14]      The Husband says that his income comes from two sources, namely a salary and benefits from EGIL in the sum of $500,000 and $270,000 from the Ben Elgner Family Property Trust.  There is no such Trust shown on the Chart so I assume it is part of BEHL.  In 2007, the Husband earned an income of $2,907,174 as shown on line 150 of his Income Tax Return for that year.  The Wife, however says that the Husband's income in 2008 was around $3,000,000.

[15]      The Husband swore a new Financial Statement on November 3. 2009 for the period July 1, 2008 to June 30, 2009.  He shows his monthly income for this period as $321,914 or $3,862,968 for that 12-month period.  Since the Husband's income increased by about $900,000 between 2007 and 2008/9, it is a reasonable inference that his income may go higher than that, depending on what he requires and how he and his brother, as directors of the various corporate interest, determine what each brother's income should be each year.

[16]      The Wife has hired an expert valuator, Martin Pont, to review and analyze the Husband's asset values and income projections to assist the Wife with her need to determining the parties' asset values for purposes of equalization and to assist her with her spousal support claim.

The Wife's Financial Statement and Budget

 

[17]      The Wife swore a Financial Statement dated June 22, 2009 and completed her current budget statement showing her expenses for the 2008 year.  That budget showed monthly expenses of $115,439 per year and no income, as she did not include the tax-free capital dividend received since it was capital, as were the repayments of shareholders' loans.  The major expenses shown include the $6,444 she was then paying for her sister's monthly expenses, a sum of $425 per month by which she supplements her father's income, her personal income tax instalments, vacation and travel of about $10,000 per month, and her share of the Florida house expenses of $6,512 per month.

[18]      The main expense, however, is $46,250 per month for home repairs, maintenance and gardening.  These expenses are as a result of the $555,000 cost of renovating her new condominium.  This will not be a recurring yearly expense.  While the Wife's legal expenses are shown as $13,668 per month, these will be on-going until the parties resolve their differences or their issues are litigated at Trial.

[19]      The Husband's position is that the Wife has received plenty of capital payments on the realization of assets or repayment of shareholder loans, such that she is not in need of income.

[20]      The Wife, on the other hand, says that she has been living off her capital assets and had to use her savings to pay for the condominium her sister uses and for the new one for investment purposes.  She has further encroached to pay for various expenses in relation to these properties.  She also points to the fact that her Husband controls CEHL and will not consider purchasing her shares in that company, which she estimates have a value of nearly $13,000,000.

[21]      The Wife says that in 2009, her expenses have decreased to $88,790.33 per month.  This equates to $1,065,483.90 per year.

[22]      The Wife is asking for retroactive spousal support to the date of separation, June 24, 2007.  In addition, she seeks on-going Temporary Spousal Support. Based on the Husband's income and the Spousal Support Advisory Guidelines (SSAGs), the Wife says she is entitled to the following Temporary Spousal Support:

1.      For the period July to December 2007, based on the Husband's 2007 income and the SSAG's, a range of $53,208 to $70,944 per month.

2.      For the period January to December 2008, based on the Husband's 2008 income of $3,862,928 and the SSAG's, a range of $118,347 to $158,347 per month.

3.      For the period January to December 2009, based on the Husband's 2008 income and the SSAG's, the same range as already noted for 2008.

Analysis

 

[23]      On the evidence before me and applying the principles as set out in the Divorce Act R.S., 1985, c.3 (2^nd Supp.) (“the Act”), I find that the Wife is entitled to both retroactive and Temporary Spousal Support.  A spousal support Order can be made under s.15.2(1) of the Act.  The factors to be taken into account are set out in subsection 15.2(4) of the Act.  The Court, in making a determination on the amount of income shall take into consideration the condition, means, needs and other circumstances of each spouse, including the length of time the spouses cohabited, the functions performed by each spouse during cohabitation and any order, agreement or arrangement the parties have already made regarding spousal support.

[24]      In the case at bar, the parties were married for thirty-three (33) years before they separated.  Theirs was a traditional marriage, where the Wife raised the children and looked after the home and the Husband worked and the only active-income earner.  The parties' lifestyle certainly changed after the Husband sold his interest in ABC in 2006, and by the time they separated, they travelled extensively from one residence to another and spent time at their various timeshares.  Given the Wife's age, she is not employable.  Nor, should she have to be in the circumstances of this case.

[25]      This is not a case where Temporary Spousal Support should be based strictly on need.  In my view, the principle of “need”as set out in Tout v. Bennett, (2003), 38 R.F.L. (5^th) 223, 2003 CarswellOnt 1625 (O.S.C.J.) does not apply.  While one could say that the Wife has no legal obligation to support her sister or assist her father financially, while the parties were married, the Husband paid for the support of the sister, as the Wife did not work.  Secondly, the Wife has a moral obligation to now continue that support rather than leave the sister in abject poverty.

[26]      Further, as was said by the Court in Lakhani v. Lakhani 2003 CarswellOnt 3928 (O.S.C.J.) in paragraph 15, “…in circumstances such as these where the ability to pay is not an issue, the parties should have the financial ability to enjoy a similar lifestyle regardless of whether they do in fact choose to enjoy such a lifestyle.”  The Husband and Wife each purchased a new residence of nearly same value, when one adds the renovation costs to the Wife's purchase price.  The Husband paid approximately $2,600,000 for his residence with renovations.

[27]      Both parties continue to use the Florida residence at a cost to each of approximately $6,700 Can. per month.  The Husband cannot now say that this is an extravagance.  The Husband in his recent budget shows that his own monthly expenses are $296,106.64.  This includes the purchase of his condominium expensed at $223,534.10 per month as well as a car purchase expense.  His budget shows nothing for clothing, household supplies, dry cleaning, groceries, meals outside the home, car insurance or other general expenses so is not completely accurate.  Adding in those items would likely put it over the $300,000 mark.

[28]      The Wife should not have to eradicate her savings to pay for her living expenses.  She sacrificed a career to be a stay-at-home wife and mother for all those years.  This is a family with extensive wealth, and both parties should live out their retirement years in a style that can easily be afforded.  The Wife instructed her lawyers after the parties separated to try to resolve their issues without having to litigate the matters.  Since the Husband took the position that much of his wealth was excluded property from his NFP Statement, the Wife says she has no choice but to resort to litigation.

[29]      The Husband has been reasonable in the amounts he ensured the Wife received as capital assets after their separation.  He was also generous to the Wife and children when he set up the estate freeze, which created the Trusts from which the Wife did receive part of her capital.  He was a generous husband while the parties were living together, purchasing beautiful residences for the parties and their children to reside in, use as recreational properties and to allow them to escape from the rigors of winter weather.  They therefore had a luxurious accustomed lifestyle for the last few years prior to separation.

[30]      In Lebovic v. Lebovic, 2001 CarswellOnt 1160; 15 R.F.L. (5^th) 115, [2001] O.J, No.1305 (O.S.C.J.), the Court made a substantial award on interim spousal support where the wife's budget showed that she required support in that range where the husband had extensive assets, and had not provided the Court with appropriate financial data.

[31]      In Turk v. Turk, 2008 CarswellOnt 512, [2008] W.D.F.L. 1972, 164 A.C.W.S. (3d) 483, 50 R.F.L. (6^th) 211 (O.S.C.J.) Madam Justice Backhouse, in attributing income of $1,000,000 per year to the husband, and in a Motion for interim child and spousal support, quoted from Labelle v. Labelle, (1993), 46 R.F.L. (3d) 341 (Man. Q.B.) in paragraph 60 of her decision, and held that Interim or Temporary Orders, by their very nature, are holding orders, and that the depth of the inquiry at this stage is different from that expected at trial.  She also addressed the issue of retroactive spousal support and ordered that it be paid from the date of separation forward to the date of the Motion.

[32]      Our Courts have looked at the date of separation as sometimes being the usual date for support to commence and it is sometimes seen as “prospective support.”  See: MacKinnon v. MacKinnon 2005 CarswellOnt 1536, 256 D.L.R. (4^th) 385 (C.A.).

[33]      In the case at bar, the parties spent almost two years after separation trying to resolve their differences before the Wife issued her Application on June 22, 2009.  She has had to substantially deplete her capital to meet her expenses.  The Ontario Court of Appeal said in Goeldner v. Goeldner, 2005 CarswellOnt 83 (C.A.) in paragraph 8, “The wife was not obliged to deplete her capital by using her inheritance to support herself.”  I adopt that reasoning in the case at bar.  Here the Wife had no income.  While she received generous amounts of capital, even if all of that were invested, it would never produce an income that could even meet her expenses after separation.  She therefore should not have to deplete a large percentage of her capital for her daily needs.

[34]      The SSAG's are the starting point in determining what the quantum of temporary spousal support should be.  This fact was recognized in Fisher v. Fisher, 2008 CarswellOnt 43 (C.A.) and in Sponagie v. Sponagie, 2009 CarswellOnt 5204 (O.S.C.J.).  They provide a range of support for the Court's consideration.  In the case at bar, the $350,000 quantum of income in the SSAG's is exceeded.  While there is no “ceiling”in the SSAG's, the Court does look at that number in determining how the formula should be applied on a case by case basis.  The SSAG's under paragraph 11.1 “The Ceiling”say, “Our preference is to use the payor's gross income as the basis for the ceiling.”

[35]      In the case at bar, the Husband's 2007, 2008 and part of 2009 income is in the range of $2,800,000 to $3,900,000.  These Guidelines show that even at $158,000 per month temporary income, the after-tax amount would be around $79,000.  On the other hand, in the 2008 year, the Husband would only be paying once for the renovations to the Wife's new home.

[36]      I am satisfied on the facts of this case and in applying the principle in Goeldner, supra, that the Wife should receive the retroactive spousal support commencing in January 2008 and continue to the date hereof, when the Temporary Spousal Support commences, without prejudice to the Wife to argue at Trial that it should go back to the date of separation.  I did not have evidence put before me as to when the parties' matrimonial home was sold and what household expenses and debts the Husband continued to make or service for the first six months after separation.  The Wife's expenses are known for the 2008 and 2009 years and I find her entitled to retroactive spousal support for those years.  I fix the quantum of such support as follows:

(a)   for the 2008 year, the Wife's monthly budget is $115,439.  This includes a monthly payment of $10,652 for income taxes estimated to be $127,824 for the year.  This is not sufficient to cover what the Wife's true income taxes would be.  I am satisfied for the first two years after separation, the Wife has had certain non-recurring expenses.  I therefore find that the Wife is entitled to the higher end of the scale and fix her retroactive spousal support at $140,000 per month.  Order to go that the Husband reimburse the Wife in the amount of $1,680,000 for retroactive spousal support.  He shall pay that sum to her forthwith.

(b)   For the 2009 year, the Wife has shown in her budget that her expenses have decreased to $88,790.33.  There is an income tax payment shown in this budget by the Wife of $5,000 per month.  In my view, the $140,000 per month retroactive spousal support should continue for the year 2009.  The Husband shall reimburse the Wife in the amount of $1,680,000 for such retroactive spousal support.  He shall pay that sum to the Wife in four equal instalments starting in January 2010 and in April, August and December 2010 or such earlier date or dates as he sees fit.

[37]      As for on-going periodic Temporary Spousal Support, it is the Husband's position that the objectives of spousal support can be met by the claimant spouse's assets.  He relies on what the Manitoba Court of Queen's Bench said in Fields v. Fields, 2000 M.B.Q.B. 32, 6 R.F.L. (5^th) 148 (M.Q.B.) at para. 10 that even where the husband has substantial means it does not make all expenses reasonable.  In that case, however, the husband's income was $140,000.  This is a far cry from the approximately $3,800,000 income the Husband, in the case at bar, had in 2008/9.

[38]      On-going periodic Temporary Spousal Support shall commence in January 2010 on the first day of January and the first day of every month thereafter in the amount of $110,000 per month until further Order of the Court or the parties reach an Agreement in writing.  I have reduced the on-going support payment by deleting the Wife's payments for furnishing the condominium, for her legal fees and sister's expenses, and taking into some income from her investments.

[39]      The Wife and Husband shall exchange copies of their Income Tax Returns each year by June 1 and copies of any Notices of Reassessments, one month after receipt of the same.

[40]      All Orders to go accordingly.

Costs

[41]      If the parties cannot otherwise agree on Costs, I will receive brief written submissions from them no longer than three pages plus copies of dockets and any cases being referred to.  Copies of any Offers to Settle shall also be included.  The Wife shall submit hers by January 8, 2010 and the Husband by January 20, 2010.

 

___________________________

Greer J.

Released:       December 2, 2009

COURT FILE NO.:  FS-09-350354

DATE:  20091202

 

ONTARIO SUPERIOR COURT OF JUSTICE FAMILY LAW   B E T W E E N:

CAROL ANN ELGNER     - and -     CLAUDE FREDERICK ELGNER

ENDORSEMENT       Greer J.

 

Released:          December 2, 2009