Family law — Marital property — Equalization — Constructive and resulting trusts — Wife was entitled to a constructive trust in the husband's inheritance because she helped him recover it — She was granted a 20 per cent interest in it — Based on an analysis of the parties' net family property the wife owed the husband an equalization payment of $57,342.

Family law — Maintenance and support — Spousal support — Calculation or attribution of income — Obligation to achieve financial independence — Awards — Lump sum — Enforcement of orders — Arrears of maintenance — Reduction or rescission of arrears — Wife worked during the marriage but was in need of support — Court determined the husband's annual income — Wife was awarded lump sum support equivalent to six months of support to enable her to complete her retraining and to obtain employment — Court refused to cancel the husband's interim support arrears because he was able to pay them when they were due.

Wills, estates and trusts law — Trusts — Constructive trusts — Unjust enrichment — Wife was entitled to a constructive trust in the husband's inheritance because she helped him recover it and the husband was enriched by her efforts — She was granted a 20 per cent interest in it

Action by the wife against the respondent husband for an equalization of assets and for lump sum spousal support — Husband was a lawyer — Wife was his secretary and married him in 1989 — Parties separated in December 1999 — Wife worked for the husband for 19 years and had no assets, savings or employment at separation — Husband's mother disinherited him because she objected to his marriage — Husband sued the mother and recovered the inheritance — Wife claimed a constructive trust in the inheritance because she assisted in its recovery — She was awarded interim spousal support but the husband owed arrears of $71,000 — During the period that the arrears accumulated the husband travelled to California, Vancouver and Ottawa — At the time of the trial the wife was 52 and the husband was 64 — HELD: Action allowed in part — Husband was to pay the wife $33,638 — Amount was secured against his interest in the inheritance — Wife had a constructive trust in the inheritance because she was involved in the litigation to recover it — Husband could not have pursued this litigation without the wife's emotional and financial support — Wife's contribution to the litigation was substantial and direct — Husband was enriched by the wife's contribution — There was a corresponding deprivation and there was no juristic reason for the enrichment — This was not an appropriate case for a monetary award because the wife's contributions and deprivations were not quantifiable — Wife was awarded a 20 per cent interest in the inheritance — Husband's net family property was negative $291,250 and that of the wife was $114,680 — Wife owed the husband an equalization payment of $57,342 — Husband earned $73,250 from his practice and an additional $8,000 from an office that he sublet for a total of $81,250 — Wife was entitled to support — Although she worked during the marriage she was in need and made some efforts to become self sufficient — She was awarded lump sum support of $20,000 — This was to give her six months to complete her retraining and to find employment — Arrears were not cancelled — There was no justification for their non-payment — Payment to the wife was based on the arrears and lump sum support that the husband owed the wife less the equalization that she owed him.

Statutes, Regulations and Rules Cited:

Divorce Act, R.S.C. 1985 (2nd Supp.), c. 3, s. 15.2(4), s. 15.2(6)

Family Law Act, R.S.O. 1990, c. F-3, s. 5(6)(b), s. 5(6)(d), s. 5(6)(h)

Counsel:

Francine Sherkin, counsel for the Petitioner

Benjamin Salsberg, counsel for the Respondent

¶ 1      A. KARAKATSANIS J.:— The equalization of assets in this case involves a determination of whether the wife has a constructive trust in her husband's inheritance. She claims the constructive trust on the basis of her efforts assisting her husband to litigate and recover his inheritance that his mother unlawfully depleted. The inheritance is the main asset and is now worth more than one million dollars before tax. At separation, it was worth less than half that amount.

¶ 2      There are a number of other issues to be resolved in equalizing the assets of the parties, particularly if the wife is not found to have an interest in the husband's inheritance. There are significant issues regarding the valuation of the inheritance at the date of marriage, as well as at separation. The wife, Donna Fox, also claims that Walter Fox's obligation to pay support to his daughter from his first marriage should be deducted as a liability at the date of marriage. Finally, Donna Fox seeks an unequal division of assets on the grounds that Walter Fox promised to pay her income tax liability and did not fully do so; that he recklessly depleted assets by failing to pay his own income taxes; and that it would be unconscionable for her not share in the increase in value of the estate.

¶ 3      Donna Fox also claims lump sum spousal support. She suggests that Walter Fox earns more than he has declared in his tax returns. Walter Fox has been ordered to pay interim support since June 2002. Arrears of $71,300 have accrued under those orders. Walter Fox does not dispute that Donna Fox is in need; she has no income and lives with her parents. He takes the position, however, that employment opportunities exist and that she has not made reasonable efforts to find employment. He asks me to impute income to her and not to order support. He also asks that I expunge arrears of support based upon the amounts already paid, his income and as a result of income attributed to Donna Fox.

¶ 4      Donna Fox, then Donna Majury, worked as a secretary and law clerk for Walter Fox, a criminal defence lawyer, for 10 years before they married in August 1989. She continued to work in the office until shortly before their separation in December 1999. The parties purchased a house in 1991 that was put in Donna's name. Sometime in the year after the marriage, Donna did not receive pay cheques; the Foxes pooled their resources, they took what they needed and could afford from the practice. The practice was not doing well and their financial circumstances became dire. Walter paid no personal income taxes and they paid only the bills they needed to pay.

¶ 5      Donna and Walter Fox spent much of their married life engaged in litigation. Walter Fox's mother, Miriam Fox, objected to the marriage because Donna was not born Jewish. Miriam Fox disinherited her son upon learning of the proposed marriage. As trustee of Walter Fox's interest in his father's estate, Miriam Fox also decided to encroach upon the estate and strip it of its assets. The estate owned a cottage and a half interest in two other buildings, a home on Lilywood and a rental property on Palmerston. In June 1989, prior to the marriage, Miriam sold the cottage and deposited the $100,000 proceeds in her own account. After the marriage, in December 1992, she transferred the estate's half interest in the other two properties to her grandchildren.

¶ 6      Walter Fox found out in June 1993 and sued his mother and his children. While he was unsuccessful at trial (Fox v. Fox Estate, [1994] O.J. No. 2779), the Court of Appeal ultimately found that Miriam Fox had acted unlawfully in encroaching on the estate ((1996), 28 O.R. (3d) 496). Leave to appeal to the Supreme Court of Canada was denied ([1996] S.C.C.A. No. 241). As well, during the marriage, Walter was involved in litigation with his former wife who sought to increase child support.

¶ 7      Donna Fox claims a constructive trust in the estate as a result of her contributions to the litigation that was ultimately required to recover the estate. Donna assisted with the litigation and legal fees were paid with joint funds. Walter says that she is only entitled to the increase in value during cohabitation; that her efforts were the normal efforts of a supportive wife; and that the money actually spent on legal fees was ultimately recovered from the estate.

¶ 8      The parties' experts also disagree on the value of the remainder interest in the estate at marriage and at separation. The difference is based upon differences in methodology and what tax disposition costs may apply. The wife further submits that the value at marriage ought to be discounted to reflect the contingency that the estate was at risk and that litigation was required to recover the asset. The wife also suggests that I use a higher value for the real estate properties, based upon her counsel's analysis of the appraisal report.

ISSUES

¶ 9      The issues regarding equalization of family assets are:

¶ 10      The issues regarding spousal support are:

EQUALIZATION OF ASSETS

1. Does Donna Fox have a Constructive Trust Interest in Walter Fox's Inheritance because of Her Contribution in Recovering the Estate?

¶ 11      Monetary awards or constructive trusts are alternative equitable remedies for unjust enrichment. There are three elements to a finding of unjust enrichment: an enrichment, a corresponding detriment and an absence of a juristic reason for the enrichment.

¶ 12      Where the services rendered are quantifiable, the remedy will ordinarily be a monetary award based upon the value of the services rendered. A proprietary interest, such as a constructive trust, will be appropriate if a monetary award is not sufficient, there is a sufficiently substantial and direct contribution to the property and there is a nexus between the deprivation and the property. If so, the extent of the trust must reflect the extent of the contribution. Based upon the "value survived" approach, the question becomes: what portion of the property is attributable to the efforts of Donna Fox? Finding a just and equitable award and fixing the relative contributions in such circumstances is an art not a science: see Pettkus v. Becker, [1980] 2 S.C.R. 834; Rawluk v. Rawluk, [1990] 1 S.C.R. 70; and Peter v. Beblow, [1993] 1 S.C.R. 980.

¶ 13      Walter inherited the residual interest in his father's estate in 1969. His mother, Miriam Fox, was the trustee and had a life interest in 75% of the income from the estate. The estate owned a cottage and a half interest in a home on Lilywood and a rental property on Palmerston. Miriam owned the other half of the two properties. When Miriam learned of the proposed marriage to Donna Fox, she immediately sold the cottage for $100,000 and kept the proceeds. She also disinherited Walter in her own will. Miriam Fox died in 2003 at the age of 94. In December 1992, Miriam transferred the remaining assets of the estate to Walter's children.

¶ 14      Walter and Donna found out in June 1993 that his mother had stripped the estate. Walter sued his mother and his children as the new beneficiaries. After a 5-day trial, in September 1994, the trial judge held that, although Miriam Fox had made the decision to disinherit Walter Fox when she learned he was marrying someone who was not born Jewish, she had the power to encroach on capital for the benefit of Walter's children. The appeal was heard in October 1995 and, in early 1996, the Ontario Court of Appeal held that the power to encroach had been exercised unlawfully for racist reasons. Miriam appealed to the Supreme Court of Canada. Leave to appeal to the Supreme Court of Canada was refused in December 1996.

¶ 15      Donna claims a constructive trust in the inheritance based upon her efforts in assisting with the litigation and her contribution to the legal fees needed to pursue the litigation. She submits that she was involved in every step of the litigation, including reviewing documentation, attending meetings, and providing support and strategic advice. She submits that they put all their energy into the estate litigation and, as a result, the legal practice suffered and the legal costs became prohibitive, especially with the overlapping child support litigation. She testified that, during the course of the litigation, their financial circumstances were dire. They paid out more than $60,000 in legal fees for the estate litigation.

¶ 16      Walter takes the position that Donna has over valued her contribution. She provided emotional support that a spouse would provide in such circumstances; she provided clerical assistance as part of her office responsibilities; and she provided very limited expertise in the litigation that was conducted by counsel throughout. He submits that, with respect to any financial contribution for legal fees, about the same amount of money came back from the costs award and from the estate during cohabitation, so that any expenditure was returned.

Donna Fox's Assistance and Support

¶ 17      The litigation consumed both Donna and Walter. They discussed it constantly. Donna's mother testified that they discussed it every time they were together. No doubt they were devastated by Miriam's actions and by her alienation of Walter's children. Donna testified that Walter was obsessed with the litigation and the practice was going down the tubes. Walter said it was difficult to separate the time spent on the litigation from the emotional pain it created. It was obvious from the testimony of both Donna and Walter that the litigation was emotionally exhausting and the trial decision was devastating. It is clear that both parties were obsessed with the litigation from 1993 until the end of 1996.

¶ 18      Leon Gavendo was trial counsel. He took instructions from Walter. Leon Gavendo testified that Donna was at most meetings and proceedings. She seemed familiar with the documentation, was a part of the discussions and was supportive of Walter. She did not, however, assist Mr Gavendo in his preparation or conduct of the litigation.

¶ 19      Walter agrees that Donna was extremely helpful and supportive in the litigation. There is no question that they discussed strategy and reviewed each document together. Donna also provided support in the office, typing, photocopying, and trying to save on legal fees and disbursements. Walter wanted Donna at the settlement meeting. They were the two witnesses called at trial. Walter conceded that Donna was very involved and supportive, especially initially, because she knew more about estate litigation and made helpful insightful comments. He said that she was good at determining what was motivating the other side. However, Walter said her attitude could also be very destructive during the stress of the litigation. He submits that legal counsel represented them throughout. He takes the position that Donna was merely supportive, as any spouse would be, particularly where they also worked together.

¶ 20      I accept Donna's evidence that, during the litigation, Walter told Donna that she had a constructive trust in his inheritance because, unlike most inheritances, they had to litigate to recover it. Walter did not deny this during his testimony. While intention plays no role in a constructive trust, it is some evidence of how Walter valued and perceived Donna Fox's contribution during the litigation.

¶ 21      I do not believe that Walter could have pursued the litigation without the emotional support and assistance of Donna Fox. Donna made an important contribution to Walter Fox's ability to pursue the litigation. While her reaction, at times, may have added to Walter's stress, there is no question, on the totality of the evidence, that her emotional support was critical, given the circumstances. As well, it is clear that she provided significant assistance in reviewing documents, providing strategic advice, and providing administrative support to keep costs down. It is not an answer to say that she was an employee and doing her job. She was not paid wages for her work; she shared with Walter in the available - and apparently inadequate - revenue from the practice.

¶ 22      In Peter v. Beblow, supra, the Supreme Court of Canada held that domestic services are not compensated by natural love and affection or by the provision of food and shelter. By analogy, it is not fair to say that Donna's contributions were the normal contributions of a loving and supportive spouse that are compensated by the nature of the relationship.

Donna Fox's Financial Contribution

¶ 23      During the litigation, their financial circumstances were dire. Walter testified that the practice started to suffer in 1990 and 1991, due to the problems in the economy, but had improved for him in late 1994 and 1995 due to the collapse of legal aid. Neither party was receiving a pay cheque. Donna wanted her own pay cheque but Walter testified that there simply was no money, especially after they purchased their house in 1991. After Donna stopped being paid directly, Walter filed tax returns for Donna, indicating income of $29,500. His tax returns were nominal returns based upon an estimated income of about $45,000.

¶ 24      Donna said she only bought clothes at second hand stores and they could not afford toiletries. Walter testified that they used what money was available from the law practice to pay the mortgage on the house and pay what was needed to keep the utilities working. Walter testified that, by 1994, he had stopped paying taxes and GST; he was behind in child support payments; he was behind in paying rent for his law practice; and was borrowing money from friends. After the trial, Walter was considering bankruptcy. Donna Fox's parents purchased groceries for them for about 12 to 18 months in 1995 or 1996. In 1996, Donna sold her diamond ring for $7,000 and put it into their bank account to pay expenses.

¶ 25      The legal fees for the litigation totalled $215,000. During the course of the litigation the parties paid $61,000 in legal fees; $10,000 was borrowed and $51,000 was paid out from the practice. After the litigation concluded, they were awarded costs of $106,000. Of that amount, their lawyer, Leon Gavendo, refunded $20,000 in February 1997; $8,500 was paid to a third party to repay a debt and $11,000 was made payable to Donna Fox. Appeal counsel was still owed $25,000 for legal fees that was increased upon assessment to $45,000. This was ultimately paid after separation out of monies from the estate.

¶ 26      There is no question that the legal fees they paid were paid out of their joint funds. Walter, however, takes the position that any monies paid out were ultimately recovered during co-habitation. In addition to the $20,000 of costs refunded, he relies on 2 payments, of $15,000 and $20,000, that were paid to him from the estate, prior to their separation. The $20,000 payment does not show up in his tax returns and there was no other evidence of the payment from the estate. He claims that of those monies, $17,000 went to pay Donna's dental costs and $10,000 went to pay for a vacation in Europe.

¶ 27      Walter was also dealing with the litigation to increase his child support of $500 per month. Ultimately he settled for the payment of $14,500. He paid legal counsel $15,000 to $20,000 for that litigation.

¶ 28      Walter takes the position that whatever money was available went to pay house expenses, Donna Fox's income taxes or dentist, or a joint vacation rather than Walter Fox's income taxes. He submits, therefore, that Donna did not make a financial contribution or suffer a corresponding deprivation relative to Walter. However, this ignores the fact that money went to pay for Walter's child support obligation and litigation, and for his accommodation. Walter benefited from the increase in value of the home to the date of separation, accommodation after separation and ultimately from recovery of the estate. Donna was also left with an income tax liability. In my view, it would be artificial and misleading to perform an accounting to determine whether Donna ultimately received a financial benefit during the marriage, when it is clear that there simply was not enough money for necessities. Available family income went to pay pressing family expenses; it is clear that there was not enough income to pay all the reasonable expenses.

¶ 29      I find that Donna's contribution to the estate litigation was real and direct. There is no question that legal fees were being paid from their joint funds. The fees were paid from the proceeds of the practice at a time when she was working full time without drawing a salary. $61,000 was paid in legal fees at a time when they had no money for toiletries or clothing. She sold her diamond ring to provide financial resources for them. She invested in the litigation to recover the estate at a time when they were in dire financial circumstances. I do not accept that the recovery of $20,000 represents a sufficient repayment of the initial legal fees at a time when money was tight and the litigation expenses represented a real deprivation. I also do not accept that the $15,000 income paid from the estate in the last years of their marriage should be treated as repaying Donna Fox's contribution to the legal fees; the income that came into the family pool to pay family expenses.

¶ 30      The evidence is also that Donna cleaned and cooked and was generally responsible for the household chores. I accept that Walter Fox's ability to pursue the litigation was enhanced by the fact that he did not have to pay fair compensation for the domestic services provided by Donna Fox.

Donna Fox has a Constructive Trust Interest in Walter Fox's Inheritance

¶ 31      In this case, I accept that Donna's support, assistance and direct financial contribution to the litigation constitutes a sufficient contribution to create a proprietary interest in the estate. It is obvious that Donna and Walter were obsessed with the litigation and what it stood for, and they were prepared to suffer financially in order to pursue it to the Supreme Court of Canada. Donna played a direct, supportive and strategic role in the litigation and contributed to the legal costs, suffering significant financial deprivation as a result. While the amount of legal fees can be quantified, the impact of the absence of those funds cannot be, at a time when they could not afford toiletries, clothes or groceries. Donna feared they would end up on the street and Walter felt he was insolvent. They felt that that their financial difficulties would be over if they could only hang on until they recovered the inheritance.

¶ 32      I therefore find that Donna's contribution to the litigation was substantial and direct. I find that Walter was enriched by Donna's contribution to the litigation; that there was a corresponding deprivation; and that there is no juristic reason for the enrichment.

¶ 33      In my view, this is not an appropriate case for a monetary award. Donna's contributions and deprivations are not quantifiable. As such, the extent of the trust must reflect the extent of the contribution. Based upon the "value survived" approach, the question becomes what portion of the property is attributable to the efforts of Donna Fox.

¶ 34      Donna has asked for a half interest, on the basis that it is difficult to determine the relative contribution of the parties. It seems to me that it would not be fair that Donna and Walter have an equal share in the inheritance. It was Walter's inheritance and he inherited it from his father in 1969. What money there was went to pay for the house that was in Donna's name and from which she ultimately reaped some benefit. Walter played a more significant role in the conduct of the litigation and, given their relative earning capacities, made a more significant financial contribution. Walter was left with a significantly larger tax liability and debts at the end of the litigation. Finding a just and equitable award and fixing the relative contributions in such circumstances is an art not a science. In these circumstances, I fix Donna Fox's interest in the estate as 20%.

2. What is the Value of the Husband's Interest in the Estate at the Date of Marriage and at the Date of Separation?

¶ 35      The parties' experts disagree upon the value of the remainder interest in the estate at marriage and at separation. The difference is based primarily upon differences in methodology and differences in the application of tax disposition costs. The wife's actuarial expert, Mr Norton, values the husband's remainder interest in the estate, before tax, as $428,611 at the date of marriage and $499,769 at the date of separation, an increase of $71,158. The husband's expert, Mr Go, values the estate, after tax, as $319,300 at the date of marriage and as $335,250 at the date of separation, an increase of $15,950.

¶ 36      There are two reasons why Mr Go's numbers are lower. Mr Go used an indexed approach in valuing the real estate at both valuation dates. Mr Norton also used an indexed approach to the real estate at date of separation, however, he used a non-indexed approach at date of marriage because he said it was known that the prices would be falling as a result of the real estate bubble in 1989. As well, Mr Go deducted income tax costs upon disposition at both dates. However, the appropriate tax consequences are in issue.

¶ 37      Unfortunately, the wife's expert did not provide an indexed value for the date of marriage and the husband's expert did not provide a pre-tax valuation.

¶ 38      The wife further submits that the value at marriage ought to be discounted to $34,305.50 on the basis that Miriam Fox had already formed the intention to strip the assets and had already sold one of the properties at the date of marriage. The discount reflects the legal costs and a 50% contingency risk associated with litigation to recover the property. Counsel for the wife also suggests that I use a higher value for the real estate properties based upon her analysis of the appraisal report.

¶ 39      There are therefore a number of aspects to valuing Walter Fox's remainder interest in his father's estate: the value of the underlying properties; the discount for Miriam Fox's life interest in the income of the estate; the notional tax costs of disposition; and finally, whether to discount the value of the estate on marriage based upon the contingency that the inheritance was at risk and litigation would be required to recover it.

a. The Value of the Properties

¶ 40      Mr Lebow prepared an appraisal report on the value of the two properties in which the estate has an interest. His opinion as to value was not challenged in cross-examination. He testified that for the Palmerston rental property, he did not have the rental income information at the date of marriage and therefore used a direct sales, or price per unit, approach rather than the preferred rental income approach he used for the date of separation.

¶ 41      In submissions, counsel asked that I find that the Palmerston property value should be increased by 8% on the basis that I should substitute a direct sales approach number for the date of separation in order to be consistent with the approach used on the date of marriage. Indeed, she asked that I go further and find the Palmerston property had a value 29% higher than that given by Mr Lebow on the basis that the direct sales approach numbers noted in the report include a gross income modifier for the date of separation.

¶ 42      I am not prepared to do so. Mr Lebow was the only real estate expert called to give evidence. Both experts who valued the discount arising from the life interest of Miriam Fox relied upon his opinion of the value of the Palmerston property. His opinion evidence was not challenged in cross-examination. He testified that while he would have preferred to have had the rental income information at the earlier date, he was satisfied he was able to value the property in 1989 without income information. He also testified that, given the market conditions at the time, he felt the price per suite value was not out of line. He said, further, that the correlation of the income approach and the price per suite value was not as strong on separation due to the market conditions at the time.

¶ 43      I am not prepared to reconstruct a new value for the property; I have no way of knowing whether it would be appropriate to manipulate the report as suggested by counsel; I have no expertise myself to substitute another value. In fact, the evidence of Mr Lebow suggests that a price per suite approach would not provide a fair assessment of market value at separation. Finally, I am satisfied that Mr Lebow, the expert, was satisfied that the valuations he provided were appropriate, even in the absence of the rental information.

b. The Remainder Interest in the Estate - Whether the Real Estate Values on the Date of Marriage should be Indexed or Non-Indexed

¶ 44      With respect to the valuation of the remainder interest in the estate, there were difficulties associated with the evidence of both experts. Each expert valued the portion of the real estate appraisal that should be attributed to Miriam Fox, as a 75% income beneficiary of a life interest, and the portion that should be attributed to Walter Fox, as the 25% income and remainder beneficiary. In both cases, the total of the two values equals the appraised amount of the real estate and the cash held by the estate.

¶ 45      The wife's actuarial expert, Mr Norton, values the husband's remainder interest in the estate as $428,611 at the date of marriage and $499,769 at the date of separation, an increase of $71,158. The husband's expert, Mr Go, values the estate as $319,300 at the date of marriage and as $335,250 at the date of separation, an increase of $15,950.

¶ 46      Mr Go used an indexed approach in valuing the real estate at both valuation dates. Mr Norton used an indexed approach to the real estate at date of separation. However, he used a non-indexed approach at date of marriage because he said it was known that the prices would be falling as a result of the real estate bubble in 1989 and, in fact, they were lower at separation. This accounts for more than 50% of the difference in the two opinions. The balance of the difference is that Mr Norton provided a pre-tax value and Mr Go deducted income tax.

¶ 47      Both experts testified that real estate is normally indexed due to the expectation that, over the long term, it will increase in value in some relation to the cost of living. I accept that, as a general rule, the valuation should not be made with the benefit of hindsight. In fact, the value of the estate increased only because the discount for Mrs Fox's life interest decreased, given that she was 10 years older at the date of separation; the values for the real estate were in fact lower at the date of separation. I also accept that, in this case, the fact that real estate values would fall was known at the date of marriage. Mr Lebow testified that it was clearly known by early to mid 1989 that there was a real estate bubble that would be bursting and that prices would decline. However, in this case the disposition could not occur until Mrs Fox's expected date of death. There is no evidence that it would have been known at the time, without the benefit of hindsight, that prices would not rise over the term of Mrs Fox's expected life span of more than 9 1/2 years. In fact, it seems to be hindsight to suggest that values had not increased by the date of separation. I accept Mr Go's evidence that the generally accepted actuarial approach was to use the same evaluation method for the same assets in same way. I would therefore prefer an indexed approach for both the date of marriage and the date of separation.

¶ 48      In this case, there is no evidence of a specific indexed value of the property before tax as of the date of marriage from either expert. However, both experts testified that this factor would account for more than half of the difference between their values. Half the difference between the two values at the date of marriage is $54,655. As this is the best evidence before me, I therefore choose the midpoint between the two expert's values for the date of marriage as representing the before tax value on an indexed approach.

¶ 49      I therefore find that the pre-tax value, on an indexed approach, is $483,266 on the date of marriage and is $499,769 on the date of separation, an increase of $16,503. [This in fact is only slightly higher than the differential between Mr Go's two after tax values, indicating that the tax consequences are not significantly different at the date of marriage and the date of separation.]

c. The Tax Treatment of the Estate

¶ 50      As well, I cannot accept the values of Mr Go unless I am prepared to accept the reduction for taxes as applied by him. Mr Go deducted income tax costs upon disposition for both the date of marriage and the date of separation. However, the applicable amount of tax is in issue. The tax appears to have been calculated at the top marginal rate, although it appears that Walter may not have been at the top marginal rate. The tax rates for the date of marriage are higher than the tax rates applicable at the earliest date of disposition, the expected life span of the Miriam Fox. As well, the taxes are calculated as taxed in the hands of the beneficiary, although it now appears that they may in fact be taxed in the hands of the estate. The taxes do not account for any potential capital costs deductions for the legal costs. Although the husband's tax lawyer had reservations about the deduction, Revenue Canada had advised that they were capital expenses and I have no doubt that, if the disposition of the estate assets are taxed in the hands of Walter, he would submit the taxes with the deduction. For all these reasons, it is difficult to determine and compare what the tax rates would be upon disposition. Unfortunately, Mr Go did not provide a before tax valuation that would have allowed for some adjustment for the likely tax consequences.

¶ 51      The exact tax consequences that will apply on the disposition of the estate are unclear at this time. The estate plans to sell its half interest in Palmerston to the other half owners for $700,000. As well, the Lilywood property will be listed on the market for $400,000. The trustee of the estate plans to have the disposition taxed in the hands of the estate rather than the beneficiary, although the trustee will consider any proposal to have it taxed in the beneficiary's hands, and will presumably agree if it would result in less tax liability. As well, although Karen Ann Slezak, one of the tax experts consulted by Walter, testified that, in her opinion, no capital deductions would be allowed for the legal costs, it appears that Walter had received legal advice to the contrary when he re-filed his income tax returns. In fact, CCRA advised, in writing, that they would be capital expenses and I have no doubt that Walter will file with the deductions, if the trustee permits him to do so.

¶ 52      For these reasons, I find that the taxes calculated by Mr Go are not the likely tax consequences. I am unable to find what the tax consequences would be either at the date of marriage or the date of separation. There are too many unresolved issues. In these circumstances, I prefer to ignore the impact of the tax consequences, both at the date of marriage and at separation. As indicated above, the differential in the after tax values indicated by Mr Go is not significantly different from the differential between the before tax values calculated on a consistent indexed approach. If the deduction for legal costs were successful, it would increase the value of the estate at separation and would therefore result in a higher differential between the value of the estate at marriage and separation. On balance, given the potential variables in the tax treatment, it seems to me fairer to ignore any potential differences in the tax consequences both at the date of marriage and the date of separation.

¶ 53      In conclusion, I accept the valuations of the property provided by Mr Lebow. I accept that the estate is valued at $483,266 at the date of marriage and $499,769 at the date of separation, an increase of $16,503. This does not reflect the tax consequences of disposition for either date.

d. The Contingency Discount.

¶ 54      The wife's submission for a discounted value of the estate is based upon the premise that, at the date of marriage, Miriam Fox had already decided to disinherit Walter and to deprive him of his father's inheritance, and had already acted upon that. Miriam had sold the cottage and misappropriated the $100,000 proceeds prior to the date of marriage. However, the transfer of the estate's interest in the properties to Walter's children did not occur until well after the marriage. The Court of Appeal in the estate litigation found that, although Miriam, as trustee, had the authority to encroach on capital for the benefit of Walter's children, she exercised her discretion unlawfully based upon her racist objection to Walter's marriage to Donna. The wife asks, therefore, that a contingency of 50% chance of recovery be applied.

¶ 55      The wife further submits that the value at marriage ought to be discounted to $34,305.50, on the basis that the asset was a contingent asset that could not be recovered without litigation. The discount reflects the legal costs and a 50% contingency risk associated with litigation to recover the property. The calculation is reflected in exhibit "A"; essentially, it takes the mid point between the positive value of the estate in the event of successful litigation, less un-recovered legal costs, and the negative value of the legal costs and costs award that would be incurred if unsuccessful.

¶ 56      The fallacy of this argument is that the two properties were not removed from the estate until well after the marriage. At best, Miriam had the clear intention to deprive Walter of the benefit of the interest in the two properties before the marriage and had already taken the act of selling the cottage. However, she had taken no actual steps to deprive him of the benefit of the two properties at the date of marriage. Walter's interest in the properties held by the estate existed at the date of marriage. I do not find that the interest should be reduced as a result of the risk that his mother would misappropriate those assets in the future. To do so would run contrary to the procedure set out in the Family Law Act, R.S.O. 1990, c. F.3. The Act takes a snapshot of the values of properties at marriage and at separation. It would be impractical to track the assets during the course of cohabitation and the Act does not attempt to do so - subject to the Court's discretion to order unequal division of assets. I therefore do not apply any contingent interest with respect to the two properties in the estate that were removed and recovered during cohabitation.

¶ 57      Different considerations apply with respect to the cottage. The asset was not in the estate at the time of marriage. It was sold prior to the marriage and the $100,000 proceeds were deposited and commingled with Miriam Fox's own funds. The Court of Appeal found that this was an unlawful appropriation of an asset of the estate.

¶ 58      In my view, the analogy to theft is apt. The asset was misappropriated prior to the date of marriage and subsequently recovered. Counsel for the husband asked me to consider an analogy to a vehicle stolen from the driveway before marriage, but recovered by efforts through the justice system after the date of marriage. It seems to me that if the vehicle were never found, the owner would have been successfully deprived of his ownership of the property and it would not be considered property at the time of marriage. However, if it was taken unlawfully and was subsequently recovered, it seems to me that the attempt to deprive the owner of his property was unsuccessful and it should count as an asset upon marriage. To find otherwise would, in effect, allow the wife to benefit from the unlawful conduct of Miriam. The policy goals of the legislation are to give credit for property brought to the marriage and to share in the increase in the value of the property. Any efforts to recover the property are more properly considered in relation to the constructive trust claim or the claim for unequal division of property.

¶ 59      Therefore, I do not accept the discount submitted by the wife to reflect the legal costs and the contingency or risk that the estate might not be recovered.

Other Values for Equalization

¶ 60      It was not disputed that the value of the matrimonial home, held in the name of the wife, was $240,000 at the date of separation. It was sold on Court order in October 2003 for $285,000. As the home was in the name of Donna Fox, she derived the benefit of the increase in price. Walter paid the mortgage and other expenses; however he derived the benefit of living in Donna's home for almost 4 years after separation notwithstanding Donna's desire to sell the house. It is clear that most of the money for the down payment came from the practice, to which they both contributed their labour. Initially, Walter claimed a constructive trust in the home; however the evidence does not support such a claim and he did not pursue this claim in final submissions.

¶ 61      I accept that general household items and furniture were divided in kind, and I accept the value of vehicles and jewellery as set out in the schedule B-1 as amended and filed as part of the wife's submissions. The wife sold her diamond ring during the marriage and the husband appears to have had the same or more jewellery at separation. I do not find that the husband's jewellery was worth less on separation than on marriage. The values for part 7(b) of the net family property statement - general household items and vehicles - are: $2,500 for the husband and $6,000 for the wife.

¶ 62      There are no bank accounts, savings securities, pensions or insurance at the date of separation.

¶ 63      The parties disagree about the value of Walter Fox's law practice at the date of separation. On earlier occasions, Walter apparently informally estimated it was worth between $10,000 and $15,000. However, Walter testified at trial that he believed that the practice could not be sold and did not have a value at the date of separation. I accept Walter Fox's evidence that it had no resale value and find the value to be nil. [Given my other findings, Walter's net family property is a negative number and therefore nil and would not, in any event, have been changed even if the practice were valued at $15,000.]

¶ 64      As indicated above, the value of the remainder interest in the estate was $499,769 at the date of separation. With a constructive trust of 20%, the value of the other property at separation is $99,953 for the wife and $399,816 for the husband.

¶ 65      The value of property on the valuation date is therefore $402,316 for the husband and $345,953 for the wife.

¶ 66      With respect to debts and other liabilities on separation, I find the husband's CCRA income tax and GST debt to be about $180,000. While the wife suggested that I use about $85,000, the amount owing in accordance with the nominal tax returns rather than the re-filed tax returns, I see no reason to do so. The tax liability as assessed by CCRA at the time was about $180,000. Any potential appeal was not pursued and did not change the tax liability.

¶ 67      I accept the evidence of Micail Kacaba and find that Walter owed him $16,000 as of the date of separation for legal fees and money borrowed to pay rent for his law offices. I also include the legal fees of $25,000 due to Mr Eastman for the estate litigation that was ultimately increased and affirmed on appeal. I accept the wife's debts in relation to the matrimonial home as laid out in schedule B-1 as amended for final submissions. The wife's debt to CCRA on separation is $18,400.

¶ 68      The total debts and other liabilities in part 8 at the date of separation are $221,000 for the husband and $212,573 for the wife.

¶ 69      With respect to the date of marriage, I do not include any values for general household items as all household items were retained on separation and any additional items were divided in kind. The wife sold her diamond ring for $7,000 and I therefore accept that her jewellery, on separation, was less than the $10,000 at the date of marriage. I prefer the value of the husband's vehicle as first stated in his January 1990 financial statement and I include it as $20,000. I also accept the husband's RRSPs at $24,000, as valued in that financial statement and deduct notional disposition costs of 30% for a value of $16,800. The documentary evidence did not support Walter Fox's recollection that he had $40,000 in RRSPs at marriage. The wife's RRSP of $1,000 is valued at $700. Walter Fox's interest in the estate was valued at $483,266. Under Part 9 the property on the date of marriage is, therefore, $520,066 for the husband and $18,700 for the wife.

¶ 70      With respect to debts and liabilities on the date of marriage, I include for Walter the car loan of $21,000 and the RRSP loan of $7,500 (both as indicated in the 1990 financial statement) and income tax arrears of $19,000. I accept that the income tax and GST liability of Walter was $13,000 arrears at the date of marriage; I add $6,000 instalments for the first half of 1999.

3. Does the Obligation to Pay Child Support at the Date of Marriage Create a Liability to be Deducted from the Assets Held at the Date of Marriage?

¶ 71      The wife submits that I should add $43,000 as a liability, as Walter was under a court order to pay $500 per month for the support of his 16-year-old daughter. He was not in arrears at the time of marriage. Shortly after his marriage to Donna, his former wife applied to vary and increase the child support. Ultimately Walter settled the litigation paying out a total of about $48,000 over the course of cohabitation, plus legal costs of $15,000 to $20,000.

¶ 72      While I accept that Walter had an ongoing obligation to pay child support at the time of marriage, I do not accept that it should be calculated as a liability with the effect of reducing his assets on marriage. It was no doubt an expense that Walter was obligated to pay; however there are many other ongoing expenses that a spouse may be obligated to pay, such as rent or future income tax that are not deducted as liabilities against existing assets at the date of marriage.

¶ 73      I find that the total debts and liabilities for the husband at marriage is $47,500. The wife had no debts or liabilities at marriage.

Summary of Equalization

¶ 74      As a result, the values for equalization are as follows:

¶ 75      The total net family property is the value of the property owned on the valuation date, minus the debts and liabilities on valuation date plus the net value of property owned on marriage. The net family property is, therefore, negative ($291,250) for the husband and $114,680 for the wife. The wife, therefore, owes an equalization payment of $57,342.

¶ 76      Given my findings on the value of the estate and the taxes owing, the husband's net family property would be a negative number even if I included the child support of $43,000 as an additional liability or if I gave the law practice a value of $15,000.

4. Should there be an Unequal Division of Assets Due to the Increase in Value of the Estate or Due to the Income Tax Liabilities?

¶ 77      Donna also asks that I order an unequal division of family assets if I find that she does not have a constructive trust in the estate. She effectively asks that Walter be responsible for her income tax debt that is now $32,436, on the basis that he received all notices and did not advise her that the debt existed and that he told her, and his accountant, that he would pay her tax debt. She did not even know there was an outstanding tax liability until 2001. She submitted that the increase in value of the estate and the reckless growth of Walter's income tax debt created unconscionable circumstances that should be redressed by an unequal division of the assets. She asked that I disregard all or at least half of Walter Fox's tax debt $180,000 in determining his net family property.

¶ 78      Subsections 5(6)(b), (d) and (h) of the Family Law Act, R.S.O. 1990, c. F.3 permits the unequal division of assets where one party has intentionally or recklessly depleted net family property, if the Court is of the opinion that equalizing would be unconscionable.

¶ 79      Given that I have found that Donna is entitled to a constructive trust interest in the estate, Walter's net family property would still have been nil even if he did not have any income tax liability. In these circumstances, there is no basis for an unequal division of net family assets.

¶ 80      However, even if I had not found a constructive trust in her favour, I would not have found that Walter's income tax liability would have made an unequal division of assets appropriate in this case.

¶ 81      Donna submits that Walter recklessly incurred income tax and GST liability. He did not tell his wife that he was not hiring a bookkeeper. She submits that the proper returns for 1987 and 1988 and the re-filed tax returns demonstrate that he knew that the nominal returns did not reflect his real tax liability.

¶ 82      In 1999, when he hoped to claim the litigation costs, he hired an accountant and re-filed his 1994 to 1997 returns. The litigation costs were not allowed, as they were capital expenses, not income expenses. The re-filing resulted in a reassessment that increased his tax liability from about $85,000 to $140,000. Walter did nothing to repay the debt and has allowed penalties and interest to accumulate. His counsel called this a cancer that is now a lien against the estate.

¶ 83      I am unable to say that the non-payment of his taxes, in these circumstances, shocks the conscience of the Court. While the nominal returns are less that the previous or subsequent income, they are not extraordinarily so. While he signed the certification that the information was correct while making no effort to add receipts or expenses from the practice, it was also clear on the face of the return that it was an estimate, an unsupported number. Walter testified that he could not afford an accountant, and wanted to file a nominal return to confirm his intention to pay taxes once his economic situation improved.

¶ 84      It is very clear, even from the evidence of Donna, that there was no money during the years of the litigation. Donna herself testified that they were in dire financial circumstances, could not even buy toiletries and depended on her parents for food while they were fighting for Walter's inheritance. It is clear that they paid only the bills they had to pay - half the utilities, and the mortgage payments and realty taxes on the matrimonial home that was in Donna's name. Neither of them drew pay cheques; they took money from the practice when it was available to pay the pressing bills. Donna's income tax liability was paid for most of their cohabitation. In such circumstances, his failure to pay his own taxes does not amount to a reckless or intentional depletion of his assets. Nor should he be penalized for increasing his liability by re-filing accurate tax returns.

¶ 85      With respect to Donna's liability for taxes, I have included it as a consideration for the finding of a constructive trust interest. If I had not found a constructive trust interest in the estate, I would have adjusted the equalization payment, in effect, to reflect his half share of the equalized debt for Donna's income tax indebtedness at the date of separation as well as the increase in the debt as at the date of the sale of the home. It appears that most of the tax liability, of about $18,400 on separation, related to the 1999 income tax year, although the documentation indicates that it appears to cover some of the preceding 2 years. There is no question that Walter told her that he was paying her taxes. Walter controlled the family finances. This was a particular sore point with Donna, as she wanted a paycheck, even though she testified she would have put it into the family pool. Even after separation, he told his accountant that he would be paying the tax liability and he sought the money to do so from the estate. All correspondence was sent to the matrimonial home in which he was residing. Donna was not even aware that there was an outstanding tax liability until 2001. Walter has had the money to pay the tax liability. Walter did not even pay the court ordered support and resisted Donna's requests to sell the house. As a result of Walter's actions, Donna was in no financial position to pay the debt until the sale of the matrimonial home, at which time it had grown to $28,678 plus interest. The liability now totals $32,436. In these circumstances, if I had not found that Donna had a constructive trust interest in the inheritance, it would have been unconscionable to allow Walter to avoid responsibility for the debt and I would have ordered that the equalization payment be reduced by $19,478, the amount of the debt less his half share of the equalized debt on separation. This would have reduced the equalization payment owing to Walter to $37,464.

II. SUPPORT AND ARREARS OF SUPPORT

¶ 86      There was no serious disagreement that Donna was initially entitled to support. She had worked for her husband for 19 years. She had no assets, no savings, and no job. She lived initially in her aunt's apartment without paying rent, and subsequently with her parents. Her parents were supporting her and had to take out a line of credit. Her father was seriously ill and in the hospital at the time of trial.

¶ 87      Walter provided only limited and sporadic support after separation in December 1999. After six weeks, he sent her $650 and after six months, he started paying $1,250 per month. He was ordered to pay interim support of $2,000 per month in June 2002; interim support of $4,000 per month in September 2002; and $2,500 support in October 2003. Arrears of $71,300 have accrued under those orders.

¶ 88      In considering the factors and objectives in subsections 15.2(4) and 15.2(6) of the Divorce Act, R.S.C. 1985 (2nd Supp.), c. 3, I do not consider that Donna was economically advantaged or disadvantaged as a result of the marriage, or its breakdown, given that she has acquired a proprietary interest in her husband's inheritance. The parties were married for 10 years, had no children and continued to work as they had in the previous 10 years. Donna is now 52 years of age and Walter is 64.

¶ 89      There is no doubt, however, that she has need and that she has made some efforts to become self-sufficient. Although Donna had previously worked for several years for lawyers, doing a variety of work, she was, in my view, hampered in her efforts to find employment by having worked for her husband, in a sole proprietor criminal law practice, for 19 years. The main contention between the parties relates to her efforts to find employment and her ability to be self-supporting.

¶ 90      Donna requests lump sum support secured against the estate, given Walter's track record in complying with the interim support orders. Walter asks me to impute income of $45,000 to $50,000 to Donna and to not order support. He also asks that I expunge arrears of support based upon the amounts paid, his income and as a result of income attributed to Ms Fox.

5. Has Donna Made Reasonable Efforts to Find Employment or Should I Attribute Income to Her?

¶ 91      Donna testified that she expected to quickly get a job. She had studied early childhood education at Ryerson and has completed courses providing training for law clerks and in mediation. She has taken various other courses to upgrade her skills, including a course on labour law. She had worked all her adult life and has more than 20 years' experience as a criminal law clerk. She was surprised that she did not immediately find a job and has been depressed as a result. Her family doctor confirmed her stress and depression as a result of her failure to find a job. He has provided counselling and anti-depressant medication. He did not consider that she was unable to work; in his opinion, the stress and depression would be resolved upon obtaining employment. He also confirmed that Donna suffered from a prolonged viral infection last summer during which she could not search for employment.

¶ 92      Donna submitted hundreds of fax cover sheets responding to job ads for law clerk, legal secretary or other law-related employment. She obtained professional assistance in preparing her resume. She attended job agencies for assistance with interview preparation, testing and job placement. She received some part time jobs and, on one occasion, was hired at a law firm only to be released within hours of starting. She included, as exhibits, responses to some of the job applications. Donna stresses that she was advised to use word of mouth and that "she pounded the pavement." Donna never declined an interview or a job offer. Donna asked Walter to use his contacts in the criminal law bar and find her a job. He did not find her a job.

¶ 93      Donna is currently enrolled in an investigative law clerk course that should be completed in February. She was doing very well until this trial commenced and they are supposed to assist in finding the students a job. She is also looking into an immigration course so that, if she is unable to find a job, she can open her own office and become a paralegal.

¶ 94      The husband questions the sincerity of her efforts to find a job. He submits that very few of the positions applied to were to law firms. He asks that I draw an adverse inference from the fact that the exhibits do not contain any applications after the first interim order was made in June 2002 and he asks me to draw an adverse inference from the fact that there was no evidence from the agencies themselves to confirm that she has used their services. Finally, Walter led the expert evidence of Helen Klein that, he submits, establishes that jobs as a law clerk or secretary were available.

¶ 95      Helen Klein is a rehabilitation counsellor and vocational assessor. She conducts vocation evaluations, including the availability of positions, the skills required and the wages available. In this case, she conducted labour market research. She canvassed various government statistics, internet job posting sites, and briefly interviewed law firms, employment agencies and the law clerk association. She provided the various average salaries for experienced law clerks, legal secretaries and general secretaries. She also testified that about one third of jobs are found by word of mouth, one third by employment agencies and advertised job positions and one third by unsolicited applications or mailings.

¶ 96      It was Ms Klein's evidence that, in such a market, someone with Donna's experience should have been able to find a job earning between $40,000 and $50,000 per year. The average salaries for legal and general secretaries ranged for the most part between $35,000 and $40,000 per year.

¶ 97      Ms Klein testified that there were many law clerk jobs available and that someone with Ms Fox's experience, as indicated on her resume, with no job gaps, should have found employment within 6 to 8 months. However, her research did not distinguish between law clerks with criminal law experience and law clerks for civil, commercial, family or real estate practices. For the most part, personal injury law firms were contacted for information about the availability of positions. Interviews with the law firms or agencies appear to have lasted about 5 minutes and consisted of generic or broad questions. The only specific information Ms Klein had about criminal law clerk positions was from an agency specializing in legal positions that indicated that there were fewer openings for criminal law clerks and that, while it was possible to transfer the skills and experience in the criminal law context to the other contexts, it would be difficult to do so as the procedures were so different.

¶ 98      I find that Helen Klein's evidence is of limited assistance. Her research did not distinguish between the types of law clerk jobs available or the types of experience required. The inquiries were brief; they were conducted by someone else, with no indication that there was any attempt to differentiate between law clerk positions in the criminal law field and other legal practices. I do not accept her view that law clerk skills were transferable between a criminal, family, real estate or commercial practice.

¶ 99      The husband takes the position that very few of the faxes relate to jobs with law firms and submitted a schedule identifying only 12 lawyers or law firms among the recipients of the faxes. However, I found this exercise of limited assistance. It disregards the clear evidence that many of the faxes refer to legal positions without identifying a lawyer or law firm. It also ignores Donna's evidence, as corroborated by Helen Klein, that only one third of jobs are found by responding to advertisements. In this case, Donna asked Walter to use his contacts in the criminal law bar and find her a job. He did not, or was unable to do so.

¶ 100      Donna testified that she quickly realized that it was difficult to obtain a job with a criminal law firm as younger lawyers and students now do their own typing and there is limited secretarial or law clerk work required. I accept that evidence. It is consistent with Walter Fox's current needs in his practice.

¶ 101      The fact that all the written documentation predates June 2002 and that there is no documentation from the agencies does raise the issue of whether her attempts to find employment in the last 3 1/2 years have been as extensive or as broad as she suggested. I find that Donna did deal with several agencies, was tested and received occasional part-time employment through them. To a certain extent, it is understandable that she would ease up on the number of faxed applications after 2 unsuccessful years; however, the absence of any faxes after that date was not adequately explained.

¶ 102      Prior to her marriage in 1989, Donna was paid between $45,000 and $50,000. Donna testified that the agencies she saw said she should be paid between $40,000 and $65,000; one agency told her she should get $60,000. The one job she did get, but lost on the first morning, was for a salary of $65,000. It appears that she was initially trying to obtain a job as an experienced law clerk for $65,000, a salary that was ultimately unrealistic.

¶ 103      I find that she initially expected to get a law clerk job with a good salary and became discouraged at her failure to obtain a law clerk position. She obtained training as a mediator and she hoped to find a job as a mediator. Her applications include applications for more senior positions requiring specialized training or experience. I find that Donna focussed her job search upon more senior positions that paid higher salaries.

¶ 104      I accept that it was very difficult to find a criminal law clerk position and that it would be difficult to find a law clerk position in another area of law without retraining. In these circumstances, I am satisfied that Donna has made all reasonable efforts to find employment as a law clerk. I also accept her evidence that eventually she was willing to take a much lower salary. However, while she said she just wanted to get into the work force at any wage, I believe that she has remained focussed on finding a law clerk or other senior position. She is now taking a course that she hopes will allow her to open her own business as a paralegal if she is unable to find a job.

¶ 105      Donna was a very difficult witness. She was very antagonistic about any questions that challenged her efforts to find a job. She obviously feels she has significant skills that should merit a senior position. Her confidence in her paralegal skills was evident in her description of the work she performed for Walter Fox, her claims regarding the value of her work in the estate litigation and in her attempt to manage her cross-examination in the trial before me. Donna obviously believes that she deserves a senior position. Indeed, Walter did not question her competence as a law clerk.

¶ 106      Donna is entitled to a reasonable period to retrain to qualify as a law clerk with additional expertise. Her course is due to finish this month, although I appreciate there may have been some difficulty as a result of this trial and the critical illness of her father.

¶ 107      Taking all these considerations together, including her efforts to find a law clerk position, her somewhat delayed efforts to retrain, her lack of diligence in pursuing other lower paying work, and the period of time that Walter will have been paying support, I believe that Donna should be given a limited further final opportunity of 6 months to complete her retraining and to find a position. If she is unable to secure a job at a level she feels appropriate, she should be prepared to pursue other secretarial or general office work. She will also have the benefit of her interest in the estate.

6. What is Mr Fox's income?

¶ 108      Mr Fox's financial statement, sworn June 2005, indicates that his current income is about $68,400, apparently excluding any income from the estate.

¶ 109      Walter testified that, prior to his marriage, his declared income had been in the $50,000 to $60,000 range. Before the marriage in 1988, Mr Fox's net income was about $50,000; in 1989, it was about $56,000 and 1990 it was about $52,000. During those years before her marriage, Donna Fox was earning about $45,000 to $50,000.

¶ 110      There is no question that it is difficult to determine Walter Fox's income since the marriage. He testified that with the collapse of his business due to the economy and the impact of legal aid, and with the burden of the estate litigation, he was unable to maintain an accountant and his business suffered, especially from 1991 to 1993. He said he could not afford to pay his taxes but he wished to file tax returns so that there could be no question of tax evasion.

¶ 111      From 1994 to 1997, Walter Fox filed nominal tax returns, estimating his net fees to be between $29,500 and $45,000. After he won the litigation, he refilled the 1994 to 1997 tax returns in 1998, claiming the litigation fees as expenses. [As an example, the re-filed 1994 return indicates net income of $54,000.] This deduction was ultimately disallowed, and his tax indebtedness increased substantially. During this time period, Walter Fox was also filing tax returns on behalf of Donna Fox with an income of $29,500. A financial statement filed in the child support litigation by Walter Fox, sworn January 1996, indicates annual income of $50,000.

¶ 112      After this application started, in May and June 2002, he filed tax nominal returns for 1998 through to 2001, again estimating his net fees to be $45,000 and subsequently, after adjustments by Revenue Canada, he ultimately adopted the figure of $64,800. In the financial material filed on the interim motion for spousal support in 2002, Walter Fox indicated an income of $64,000. Nowhere in the tax returns or in the material before the Court did Walter indicate that the numbers were estimates. Although he states that he maintained a record of all receipts and disbursements in his practice, he made no attempt to add and deduct those numbers. Walter Fox testified that he was effectively insolvent and treading water while waiting to inherit.

¶ 113      It seems that Walter stopped using an accountant except for the purpose of re-filing the 1994 to 1997 tax returns; he stopped using a trust account in 1996, until he opened one briefly in 2002; and he issued no client accounts from late 1999, when Donna stopped working until May 2002. In 2003, he hired a part time bookkeeper.

¶ 114      The statements of income and disbursements for 1999 to 2004, provided for this litigation, are also unsatisfactory; they do not have all the supporting documentation; they are clearly incorrect regarding the payments for spousal support; and the methodology is inconsistent and sometimes confusing.

¶ 115      The 1999 statement indicates net income of $45,866. The 2000 statement prepared subsequently by a part time secretary/bookkeeper indicates a net income of $49,500, of which $12,520 was paid to Donna, $14,470 was paid for the mortgage and $22,584 remained as a draw for Walter Fox. There is no supporting documentation for the expenses.

¶ 116      The 2001 statement indicates net income of $72,691, of which $15,750 was paid to Donna, $19,360 was paid for the mortgage. In addition, Walter Fox received $9,000 in income from the estate. He also collected $6,879 for GST that he did not remit to the government.

¶ 117      The 2002 statement indicates net profit of $35,800 and estate income of $9,314. He would also have collected money for GST that he did not remit. Half the car expenses and promotional expenses deducted from the gross business income totalled $3,600 and would normally be paid as personal expenses in after tax dollars. Walter Fox's financial statement, sworn April 25, 2002, indicates a net income of $64,000. He paid $13,300 for support - out of $24,000 owing - and $21,000 for the house.

¶ 118      The 2003 statement indicates net profit of $70,380 and $9,000 in income from the estate. Unremitted GST would have totalled about $10,000. He paid $17,950 for support and $17,000 for the house. Half of the expenses for travel, promotion and the car, deducted from the gross business income, total $5,284 and would normally be paid in after tax dollars for his personal benefit. That amount should be attributed as income, for a total income of $75,500 from his practice.

¶ 119      The 2004 statement indicates net professional income of $65,000 and $35,000 of estate income - that was not disbursed to him. Half of his travel, promotional entertainment and car expenses total about $6,000 and should be attributed as income, for a total income of $71,000 from his practice. Starting November 2004, he also received net $675 rent from his law offices. He also collected about $10,000 GST that he did not remit.

¶ 120      In his financial statement, sworn September 6, 2004, Walter Fox claims his net income to be $48,000. Walter Fox paid support of $17,000 to Donna, out of an obligation of $30,000. Clearly he undervalued his income in the financial statement filed with this court.

¶ 121      With respect to Mr Fox's income going forward - excluding income from the estate - Walter submits that his income is about $68,400. However, the personal benefit of travel, promotional entertainment and car expenses has totalled $6,000 in 2003 and 2004; and his income from his practice has totalled $75,500 in 2004 and $71,000 in 2004. Since November 2004, he also has the additional net income of $675 monthly or $8,100 annually from subletting an office. Given that no supporting documentation has been provided for 2005, I prefer to rely upon the information in the 2003 and 2004 statements. For the purpose of determining his means, I find that his income from his professional practice is $73,250 and, including the rent amounts, $81,250.

¶ 122      Counsel for the wife suggested that because Walter Fox often received cash for his services; did not have an accountant or keep proper books since 1994; did not have a trust account after 1996, except for a brief period; and because he made no effort to determine his income in his nominal tax returns, he must be earning more than he has claimed.

¶ 123      Counsel went through two client files and Walter was unable, on the stand, to reconstruct and account for all the cash received. However, Donna was not aware of unaccounted cash during the 20 years she worked in the office and kept the books. She kept the books and the business monies were deposited in a bank account in her name after Revenue Canada garnished Walter's accounts in 1996. On the stand, Donna stated that she did not see the records at the later part of the marriage and Walter was not bringing money home; however, she also admitted that she has no basis to say he was not recording all the money he received. While his financial records are highly unsatisfactory, there is insufficient evidence before me to establish, on the balance of probabilities, that Walter Fox is not recording all the money he receives from his practice.

7. Should I Expunge Arrears of Support?

¶ 124      Even putting aside any income from the estate and the unremitted GST, it is clear that there was no justification for Walter Fox's non-payment of the interim support orders on the basis of financial considerations. Walter Fox travelled to California in 2003, Vancouver in 2004 and Ottawa in 2005. Counsel candidly conceded that the purging of arrears would be justified only if I found that Donna should have been working and I attributed income to her. I have not done so. I find that Walter Fox owes arrears of $71,000.

8. Quantum

¶ 125      In these circumstances, given the arrears of support and a history of non-payment of debts, I agree that any spousal support should be a lump sum. As noted above, for the purposes of determining Walter's means from his professional practice I find that he earns $81,250 annually from his practice to meet his support obligations. I do not include consideration of the income from the estate given that will be distributed between them. In my view, a lump sum of $20,000 should be adequate for Donna to find employment over the next 6 months. Counsel for Walter appropriately agreed that any indebtedness could be secured against Walter Fox's interest in the estate.

DISPOSITION

¶ 126      In conclusion, I find that Donna Fox owes Walter Fox an equalization payment of $57,342. Walter Fox owes Donna Fox arrears of $71,000 and lump sum spousal support of $20,000. I therefore order that Walter Fox pay Donna Fox $33,638. That sum shall be secured against Walter Fox's interest in the estate.

¶ 127      Donna Fox owns 20% of Walter Fox's interest in the estate of his late father. As a result of this judgment, Walter Fox will have paid full support for at least 5 years. It is therefore appropriate that Donna not share in the income that the estate has generated to this date.

Costs

¶ 128      If the parties do not agree, Donna Fox may make brief written submissions, together with any attachments. Walter Fox may respond within 2 weeks after that; reply if any to be within one further week. Written submissions should not exceed three typewritten pages.

A. KARAKATSANIS J.

QL UPDATE:  20060224
cp/e/qw/qlesm