



COURT OF APPEAL FOR ONTARIO

CITATION:
Townshend v. Townshend, 2012
    ONCA 868

DATE: 20121211

DOCKET: C53680

Simmons, Cronk and Rouleau JJ.A.

BETWEEN

John Charles Townshend

Applicant (Appellant)

and

Barbara Elizabeth Townshend

Respondent (Respondent in appeal)

Robert N. Kostyniuk, Q.C., for the appellant

Robert B. Lawson, for the respondent

Heard: November 15, 2012

On appeal from the order of Justice Emile R. Kruzick of
    the Superior Court of Justice, dated December 2, 2010.

Simmons
    J.A.:

[1]

The issues on appeal arise out of a family law proceeding.
The parties were married on June 17, 1972 and separated on May 26,
    2005.
The contested issues at trial related to the division and
    calculation of their net family properties.

[2]

The trial judge rejected the wifes claim for an unequal division of the
    net family properties. He went on to address various disputed items relating to
    the calculation of each partys net family property. After dealing with the
    disputed items, the trial judge calculated the equalization payment using those
    findings together with the undisputed figures relating to the net family
    property calculations. He ordered the wife to pay the husband an equalization
    payment of $31,368.07.

[3]

On appeal, the husband submits that the trial judge
    erred in his findings concerning the disputed items in the net family property
    calculations. In the event he is successful on appeal, he seeks leave to appeal
    the costs award of $35,000 made in favour of the wife.

[4]

For the reasons that follow, I would allow the appeal.

A.

Equalization issues

[5]

I will deal with each disputed item relating to the net
    family property calculations and leave it to counsel to make the required
    adjustment to the equalization payment that was ordered. I note at the outset
    that during oral argument the wife asked that, in the event this court
    concluded that the trial judge erred in his findings, rather than ordering a new
    trial, this court make the necessary findings.

(1)

Property Brought into the Marriage  the Husbands Claim for an $8,500
    credit relating to a one-acre parcel of land

[6]

At trial, the husband claimed an $8,500
    deduction for the value of a one-acre parcel of land, which he claimed he owned
    on the date of marriage. The one-acre parcel formed part of a 25-acre parcel of
    land registered in the husbands parents names. Both the husband and his
    sister testified that, at the time the land was acquired, they used their own
    earnings to purchase one-acre shares in the parcel of land.

[7]

The husbands father died in 1971. Both the
    husband and his mother claimed that: the 25-acre parcel was sold in 1971; the
    transaction did not close until 1973; following the closing, the husband alone
    received $8,500 from the proceeds of sale. The husband acknowledged that these
    monies were eventually invested in the matrimonial home.

[8]

The wife disputed the husband's claim that the
    property was sold in 1971. According to her, the parties received a cheque
    payable to both of them representing the sale proceeds of the one-acre parcel
    in 1973  moreover, that cheque was subsequently deposited into a joint
    account.

[9]

The trial judge rejected the husbands claim for
    a deduction because the evidence concerning the payment of the proceeds was
    contradictory and because the husband had no documentary evidence to support
    his assertion that the sale proceeds were paid to him alone. In my view, he
    erred in doing so.

[10]

Although the evidence concerning payment of the
    proceeds of sale for the husbands one-acre share was contradictory, on the
    appeal hearing, the wifes counsel acknowledged that there was no dispute at
    trial that the husband alone had an equitable interest in the one-acre parcel
    on the date of marriage. This acknowledgement is consistent with the evidence
    given by the husband and his sister concerning the acquisition of the property.

[11]

Section 4(1) of the
Family Law Act
, R.S.O.1990, c. F.3, defines net family property as the value of
    all property (except excluded property) owned by a spouse on the valuation date
    (net of debts and liabilities) less the net value of property, other than a
    matrimonial home, owned by a spouse on the date of marriage.
[1]


[12]

Accordingly, unlike the case with excluded
    property, the fact that property owned by a spouse on the date of marriage may
    have been distributed or invested jointly following the date of marriage is
    irrelevant. The claiming spouse is entitled to a deduction for the net value of
    property other than a matrimonial home owned on the date of marriage.

[13]

On appeal, the wife argued that the husbands
    claim for a deduction should fail in any event because the husband did not
    submit evidence at trial of the value of the land as of the date of the
    marriage.

[14]

I would reject this argument. Even assuming the
    trial judge rejected the evidence that the sale of the 25-acre parcel was
    negotiated in 1971, denying the husbands claim entirely because he failed to
    obtain a valuation date appraisal would be unreasonable. The value of the lands
    at issue is relatively nominal. There was undisputed evidence of their value close
    to the date of marriage.

[15]

Had the wife advanced a reasonable basis for a discount
    of the value of the one-acre parcel as of the date of marriage, I would have
    considered it. However, disallowing the deduction entirely because the husband
    failed to obtain a valuation date appraisal would mean increasing the cost of
    resolving family law disputes unnecessarily.

[16]

In all the circumstances, I would allow the
    $8500 deduction claimed by the husband.



(2)

Inter-vivos
gift received during
    marriage  The Husband's Claim for a $25,000 exclusion

[17]

At trial, the husband claimed an exclusion for a
    $25,000
inter-vivos
gift, which he said he
    received from his mother in June 2001. He claimed that the wife deposited these
    funds into a joint bank account contrary to his instructions.

[18]

The trial judge accepted that the funds were
    paid to the husband alone. However, he found that the gift lost its
    exclusionary character when the funds were deposited, initially, into a TD Bank
    joint account in July 2001 and, subsequently, into a Scotia McLeod joint
    account in September 2004. Accordingly, the trial judge denied the husbands
    claim for a deduction for the amount of this gift.

[19]

I take it as implicit in the trial judge's
    reasons that he rejected the husband's evidence that the wife deposited the
    funds into a joint account contrary to the husband's instructions. On the
    appeal hearing, the husband acknowledged that there had been some activity in these
    accounts, creating an available inference that the husband was aware of the
    nature of the accounts. In the circumstances, I see no basis on which to
    interfere with the trial judge's implicit finding.

[20]

Nonetheless, in my view, the trial judge erred
    in failing to grant the husband an exclusion for one-half of the amount of the
    gift.

[21]

On the appeal hearing, the wife relied on
Belgiorgio
    v. Belgiorgio
(2001), 10 RFL (5th) 239 (Ont. S.C.), affd 23 R.F.L. (5th)
    74 (Ont. C.A.), as support for the proposition that a gift loses its
    exclusionary character completely when deposited into a joint account.

[22]

In
Belgiorgio
, the husband sought to exclude inherited
    money that he claimed had initially been kept segregated in GICs, but later was
    deposited into a joint account and used to purchase specific items. The trial
    judge appears to have accepted the wifes evidence that the inherited funds
    were deposited directly into the joint account and used, along with other
    funds, as part of leading an executive lifestyle following the inheritance.
    In the circumstances, the trial judge concluded that the husband could not meet
    his onus to trace the inherited money into the property he sought to exclude.
    This alone was enough to deny the husband the exclusion. Nonetheless, at para.
    33 of his reasons, the trial judge went on to state that the inheritance lost
    its exclusionary nature when deposited into the joint bank account.

[23]

The trial decision in
Belgiorgio
was upheld on appeal.
    However, in upholding the result, this court referred only to the trial judges
    finding that the husbands evidence was unreliable and did not refer to the
    trial judges conclusion about the effect of depositing funds into a joint account.

[24]

This courts decision in

Colletta v. Colletta
, [1993] O.J. No. 2537,
at
    para. 1, is also of limited assistance.

[25]

In
    that case, the trial judge allowed the husband a deduction for $23,518.71,
    being the amount on deposit in a joint account at the date of separation. The
    monies had been a gift from the husbands mother. On appeal, this court
    concluded that both parties had an equal interest in the funds. As the husband
    had subsequently used the funds to purchase a house, this court held that the
    wife should receive a credit for one-half of the amount on deposit as of the
    date of separation against the equalization payment she owed to the husband.

[26]

This
    court went on, however, to allow the wife to simply reduce her equalization
    payment to the husband by the value of her half-interest in the property deposited
    into the joint account - money that the husband now owed her. However, by
    allowing this direct offset and failing to also reassess the wifes net family
    property, which was now increased by her ownership interest in the joint
    properties, the effect of the court's decision was actually to deprive the
    husband of the value of his exclusion.

[27]

Since
    the reasons in
Colletta
suggest that the intention was to correct the
    trial judge only in so far as he failed to take the presumption of joint
    ownership into account, the decision does not provide clear guidance on the
    treatment of excluded property deposited into a joint account.

[28]

Interestingly,
Colletta
, for the most part, has been
    interpreted as standing for the proposition that excluded property deposited
    into a joint account loses its exclusionary character to the extent of the
    one-half interest that is presumed to be gifted to the spouse:  see
Goodyer
    v. Goodyer
, [1999] O.J. No. 29 (Gen. Div.), at para. 76;
Cartier v.
    Cartier
, [2007] O.J. No. 4732 (S.C.), at footnote 4; and Ilana I.
    Zylberman & Brian J. Burke, "Tracing Exclusions in Family Law"
    (2006) 25 Canadian Family Law Quarterly, 67.

[29]

In my view, this is, in fact, the correct approach.
That this is so
is
    best understood by recalling that, in addressing property issues under Part I
    of the
Family Law Act
, the court first
    determines issues of ownership before turning to questions involving
    calculation of the parties net family properties: for example, see
McNamee
    v. McNamee
, 2011 ONCA 533, at paras. 56-63.

[30]

While s. 14 of the
Family Law Act
creates certain presumptions with respect to the ownership of
    property, it does not address how each partys net family property is to be
    calculated. Rather, it is s. 4(2) that stipulates the exclusions from net
    family property.

[31]

In relation  to gifts, s. 4(2) states that, “[p]roperty, other than a matrimonial home, that  was acquired by gift or inheritance from a third person after the date of  marriage” is to be excluded. Similarly, “[p]roperty other than a matrimonial  home, into which [a gift] can be traced” is excluded.

[32]

Given that the legislature made clear its
    intention that gifts used to purchase a matrimonial home lose their excluded
    character, but did not do the same in relation to monies deposited into a joint
    account, I discern no legislative intent that the entire amount of the gift should
    lose its excluded character when deposited into a joint bank account. See also:
Brubacher v. Brubacher
, [1996] O.J. No. 2730
(Gen.
    Div.), at para.
34;
LeCouteur v.
    LeCouteur
(2005), 18 R.F.L. (6th) 386 (Ont. S.C.),
    at paras.
50-51;
Cartier
, at paras.
2,
33-36.

[33]

In my view, therefore, the trial judge in this
    case erred in concluding that all of the gift monies lost their excluded
    character when deposited into a joint account.

[34]

On the appeal hearing, counsel for the wife acknowledged that the
    $25,000 was included in the September 2004 deposit into the Scotia McLeod
    account. However, he argued that the husband had failed to produce documents to
    show whether the $25,000 gift could be traced into the funds that remained in
    that account as of the date of separation. Moreover, counsel noted that the
    husband had breached an undertaking to produce such documents.

[35]

I would reject this argument. In my view, assuming, without
    deciding, that monetary gifts must be traced, the wifes position reflects an
    overly formalistic approach. It was undisputed that there was approximately
    $31,000 in the Scotia McLeod account on the date of separation, approximately 9
    months after the September 2004 deposit. In these circumstances, a compelling
    inference arises that the $25,000
inter-vivos
gift could be traced into those monies. While I do not condone the failure to
    comply with undertakings, I note that the account was a joint account and that
    the wife would have had equal access to the relevant documents. In all the
    circumstances, I would allow the husband an exclusion for an
inter-vivos
gift in the amount of $12,500.

(3)

The 1967 Buick

[36]

The husband claimed that the value of a 1967
    Buick Wildcat automobile registered in his name on the date of separation
    should be excluded from his net family property, either because he acquired it
    by gift during the marriage or because he had transferred the equitable
    ownership of the vehicle to the parties son prior to the date of separation.

[37]

The car was originally owned by the husbands
    father. As of the date of trial, it was registered in the name of the parties
    son.

[38]

The husbands mother testified that, following
    her husbands death she drove the car for a few years and then gave it to her
    son, Paul, to encourage him to go back to school. The husband claimed that,
    during the marriage, Paul gave him the car for $400, being the amount Paul had
    recently paid for new tires for the car.

[39]

The husband and his son both testified and
    claimed that the husband gifted the car to his son prior to the date of
    separation.

[40]

The trial judge concluded that, technically,
    the husband did not acquire the car by way of gift; rather, he purchased it,
    albeit for nominal consideration. Further, the trial judge rejected the
    evidence that the husband gifted the car to his son prior to the date of
    separation. The trial judge accordingly included the sum of $5,750 in the husbands
    net family property, representing the value of the car on the date of
    separation.

[41]

I acknowledge that it was open to the trial
    judge to reject the evidence that the husband gifted the car to his son prior
    to the date of separation. Nonetheless, in my view, the trial judge erred in
    including the entire value of the car in the husbands net family property.

[42]

It is implicit in the trial judges reasons that
    he accepted the husbands evidence that he acquired the car from his brother by
    effectively reimbursing his brother for the cost of new tires the brother put
    on the car.

[43]

In these circumstances, in my view, it was
    unreasonable to conclude that the husband had not acquired the car by way of
    gift. To the extent that the value of the car exceeded the value of the new
    tires, this additional value was acquired by gift and should be excluded from
    the calculation of the husbands net family property. The husband paid for the
    tires and it was only their value -- $400  that should have been included in
    the husbands net family property.

[44]

Accordingly, I would reduce the amount included
    in the husband's net family property for this item by $5,350.

(4)

The GMAC Loan

[45]

The trial judge rejected the husband's claim
    that he owed $12,790 to GMAC for a car loan on the date of separation because
    the husband failed to provide documentation to prove the existence of the loan
    on the date of separation.

[46]

The husband has filed fresh evidence on appeal,
    which demonstrates that the amount owing on the loan as of the date of
    separation was $12,483.36. Moreover, contrary to the trial judges conclusion,
    the husband in fact did file evidence at the trial that supported his claim
    about the existence of this debt on the date of separation.

[47]

Prior to trial, counsel for the husband obtained
    a copy of GMACs file relating to the debt. Although GMAC had sold the
    particular indebtedness, its file revealed that the indebtedness was not paid
    off until 2006. Further, the copy of the conditional sales contract in the file
    indicated that the original amount financed was $30,696.62 and that this amount
    was repayable in 48 monthly installments of $639.92 commencing November 25,
    2002 at 0% interest.

[48]

Assuming that the husband paid the 31 monthly
    payments that fell due between November 25, 2002 and the date of separation,
    the amount outstanding as of the date of separation would have been
    approximately $10,871.84. In my view, the trial judge erred in failing to take
    this documentary evidence into account.

[49]

Although the fresh evidence indicates that a
    somewhat larger amount was owing, it is evident that the husband obtained that
    evidence only because the trial judge disallowed his claim altogether. In the
    circumstances, I would allow the husband a deduction in the amount of
    $10,871.84.

(5)

The Wife's Claim for a Deduction for a $12,000
    Debt Owing to her Parents

[50]

The trial judge allowed the wife a $12,000
    deduction for a debt owing to her parents relating to monies borrowed for
    renovations to the matrimonial home because the wife filed a promissory note as
    an exhibit at trial to support the existence of the debt. The trial judge rejected
    the husband's assertion that no monies were owing to the wife's parents because
    the husband had nothing in writing to support his claim.

[51]

However, the trial judge overlooked the fact
    that during the trial, the wife withdrew her claim based on the promissory
    note. Instead, she chose to advance this claim solely as a claim for a debt
    owing to her parents relating to renovations to the matrimonial home.

[52]

The trial judge also overlooked the fact that a
    document signed by the wifes parents was filed, without objection, as an
    exhibit at trial in which the wifes parents denied that the wife owed them any
    money.

[53]

As the trial judge erred in allowing this
    deduction on the basis of the promissory note and in failing to squarely
    address the alternative basis for the wife's claim, I see no alternative but to
    set aside the trial judges finding and to deny the wifes claim for this
    deduction. Not only did she not have any documentary evidence to support this claim,
    the documentary evidence that did exist undermined it.

(6)

The Husbands Claim relating to the Hallstand

[54]

During oral argument on the appeal, the husband
    abandoned his claim in relation to this issue.

B.

The Trial Judges costs award

[55]

Both parties claimed costs at trial. The husband
    claimed costs in the range of $53,000 to $73,000; the wife claimed costs of
    $60,000. The trial judge awarded $35,000 to the wife as partial indemnity costs
    of the trial.

[56]

Although the wife was unsuccessful in her claim
    for an unequal division of net family properties and the husband was successful
    in his claim for an equalization payment, the trial judge found that the
    husband had acted unreasonably in advancing a claim for nominal support and in
    disputing the date of separation until the eve of trial. Further, the trial
    judge noted that, albeit on the eve of trial, the wife had offered to settle
    for an amount almost double the amount awarded to the husband at trial.

[57]

Given the adjustments I would make to the net
    family property calculations, the husband's net family property will decrease
    by approximately $37,222 and the wife's net family property will increase by
    $12,000. This will result in a net increase of approximately $24,611 in the equalization
    payment owing to the husband. In the light of this fact and the other factors
    identified by the trial judge, the husband's proposal that there be no costs of
    the trial is reasonable. Like the trial judge, I think that this case should
    have been settled.

C.

Disposition

[58]

Based on the foregoing reasons, I would allow
    the appeal and set aside paragraphs 2 and 9 of the trial judge's amended order
    dated December 2, 2010. I would substitute an order for an equalization payment
    to the husband in an amount to be agreed upon by counsel, taking account of
    these reasons, for paragraph 2 of the December 2, 2010 amended order. And I
    would substitute an order that there be no order as to the costs of the trial
    for paragraph 9 of the December 2, 2010 amended order.

[59]

I would award costs of the appeal to the husband on a partial
    indemnity scale, fixed in the amount of $4500, inclusive of disbursements and
    applicable taxes.

Released: JS December 11, 2012

Janet
    Simmons J.A.

I
    agree E.A. Cronk J.A.

I
    agree Paul S. Rouleau J.A.





[1]

The definition of net family property in s. 4(1) of the
Family Law Act
reads as
    follows:

net family
    property means the value of all the property, except property described in
    subsection (2), that a spouse owned on the valuation date, after deducting,

(a) the
    spouse's debts and other liabilities, and

(b) the
    value of property, other than a matrimonial home, that the spouse owned on the
    date of the marriage, after deducting the spouse's debts and other liabilities,
    other than debts or liabilities related directly to the acquisition or
    significant improvement of the matrimonial home, calculated as of the date of marriage.


