



COURT OF APPEAL FOR ONTARIO

CITATION:  Reisman v. Reisman, 2014 ONCA 109

DATE: 20140211

DOCKET: C55669

Hoy A.C.J.O., Laskin and Tulloch JJ.A.

BETWEEN

Linda Joy Reisman

Applicant (Appellant)

and

Howard Jonathan Reisman

Respondent (Respondent in Appeal)

Gary S. Joseph and Serena Lein, for the appellant

Nancy Iadeluca, for the respondent

Heard:  October 11, 2013

On appeal from the order of Justice Darla A. Wilson of
    the Superior Court of Justice, dated May 31, 2012, with reasons reported at
    2012 ONSC 3148, 22 R.F.L. (7th) 423.

Laskin J.A.:

A.

INTRODUCTION

[1]

Linda and Howard Reisman were married for 20 years.  They separated in
    October 2006, though they remained in their matrimonial home until it was sold
    in April 2008.  At the start of trial in September 2011, Linda was 46 and
    Howard was 48.

[2]

The Reismans have four children:  a daughter, 22 at the time of trial,
    and three sons, who were 20, 18 and 15.  The two older children lived away from
    home; the two younger children lived alternatively with both their parents,
    though at the time of trial, Max, the 18 year old, was living with his mother.

[3]

In December 2007, the parties entered into an interim domestic contract
    under which Howard paid monthly spousal support and made an equalization
    payment to Linda on a without prejudice basis pending trial.  Then, in
    November 2010, Linda and Howard settled all issues relating to their children,
    and agreed that neither would pay child support to the other.

[4]

The parties litigated two main issues:  first, whether an estate freeze
    undertaken by Howards father Fred Reisman in 1998 amounted to a fraudulent
    conveyance; and second, the amount and duration of spousal support.  After a
    nine day trial, the trial judge, in comprehensive reasons for judgment, dismissed
    Lindas claim that the estate freeze was a fraudulent conveyance.  She ordered
    Howard to pay Linda monthly spousal support of $4,500 for 10 years and lump sum
    support of $119,956.34,
[1]
but awarded costs against Linda in the amount of $250,000.

[5]

Linda Reisman raises five issues on her appeal:

(1)

The trial judge denied Linda a
    fair trial by (a) permitting Howard to rely on his fathers affidavit as
    evidence of the intent of the estate freeze; and (b) refusing to permit Linda
    to withdraw an admission that common shares Howard received on the estate
    freeze were a gift and thus excluded from his net family property.

(2)

The trial judge erred in making
    a time-limited support order, and erred in awarding an amount at the low end of
    the Spousal Support Advisory Guidelines (Ottawa: Department of Justice, 2008).

(3)

The trial judge erred by
    accepting that the common shares Howard received in the estate freeze were a
    gift and consequently erred by awarding Linda an equalization payment that was
    far too low.

(4)

The trial judge erred by failing
    to hold that the estate freeze amounted to a fraudulent conveyance.

(5)

The trial judges costs award
    was excessive.

[6]

The first issue, whether Linda was denied a fair trial, concerns matters
    bearing on the effect and intent of the estate freeze.  I will deal with these
    matters when I discuss whether the common shares Howard received in the estate
    freeze were a gift and whether the estate freeze was a fraudulent conveyance.

B.

ANALYSIS

(1)

Did the Trial Judge Err in her Award of Spousal Support?

[7]

Howard acknowledged that Linda was entitled to spousal support.  Their
    dispute centred on the amount and duration of that support.

(a)

The Interim Agreement and the Trial Judges Award

[8]

Under the interim domestic contract, which the parties signed in
    December 2007, Howard agreed to pay Linda spousal support of $5,750 per month
    pending trial, and without prejudice to his right to seek to pay a lower
    amount.  He also paid Linda an advance equalization payment of $226,538.

[9]

The trial judge awarded Linda an equalization payment of only $106,581.66,
    leaving an overpayment of $119,956.34.  Howard agreed to forego the overpayment
    in return for paying less monthly support.  The trial judge ordered that $119,956.34
    be treated as lump sum spousal support.  That amount is equivalent to $1,500
    per month for 10 years.

[10]

In
    addition, the trial judge ordered monthly spousal support of $4,500 for 10
    years (unless there is an earlier material change in circumstances).  In
    arriving at this amount, she took Howards 2011 income for support purposes to
    be $192,000, and she imputed to Linda annual income of $30,000.  Under a no
    child support scenario with a payor earning $192,000 and a recipient earning
    $30,000, the Spousal Support Advisory Guidelines yield a monthly support
    payment of $4,050 at the low end and $5,400 at the high end.

[11]

The
    trial judges support order was thus at the lower end of the Guidelines.  She
    also time-limited support for 10 years because this is an appropriate period
    of time to recognize any economic disadvantage that was suffered by the Applicant
    by reason of the marriage and it promotes the economic self-sufficiency of the Applicant
    within a reasonable period of time (para. 41).  The trial judge did not,
    however, require Linda to pay back the difference between the support she had
    been receiving under the interim agreement and the support ordered at trial.

(b)

Positions of the Parties

[12]

Linda
    submits that the trial judge erred by focusing on the goal of self-sufficiency
    and did not take account of all the considerations that go into an appropriate
    support order.  She contends that after a largely traditional marriage of 20
    years during which she never held a full-time job outside the home, she is
    entitled to a higher amount of support payable indefinitely.

[13]

Howard
    submits that in making a time-limited order at the lower end of the Guidelines,
    the trial judge exercised her discretion reasonably.  Even if we might be
    inclined to make a different order, we are not justified in interfering with
    the trial judges award.

(c)

The Parties Backgrounds

(i)

Howard

[14]

During
    the marriage, Howard worked mainly for his fathers real estate company, Fred
    Reisman and Associates.  His salary increased over the years, and by the time
    of trial he was earning nearly $200,000 annually.  Although Linda took on more
    of the responsibilities for maintaining the household and raising the children,
    Howard also assisted in household chores and childcare.


(ii)

Linda

[15]

Before
    marriage, Linda earned a diploma in Early Childhood Education.  However, she
    has not worked in that field for over 20 years.  During marriage, she had a
    series of part-time jobs in retail, event planning and design.  For a time, she
    also ran her own gift basket business.  She earned between $4,000 and $24,000
    annually.

[16]

Linda
    testified that she could not have taken on a full-time job outside the home
    because she assumed most of the responsibility for raising the children two of
    whom have learning disabilities  and for maintaining the household.  She said
    that now, even though the children are grown up, she has to be available for
    Max, who is living with her and suffers episodes of severe depression.

(iii)

Howards
    Parents

[17]

While
    they did not live extravagantly during their marriage, Linda and Howard lived
    well.  That they did so was partly attributable to the generosity of Howards
    parents, Fred and Marian Reisman.  Mr. and Mrs. Reisman gave their son and
    daughter-in-law a loan to assist them in buying their first home, eventually
    paid off the mortgage on the home and purchased RRSPs for each of them.  At the
    date of separation, Linda had almost $243,000 in her RRSP.

[18]

In
    addition, Fred and Marian Reisman arranged for each of their 16 grandchildren,
    including Howards and Lindas four children, to have their own income.  Linda
    and Howard used this income  approximately $70,000 annually  to fund their
    living expenses.  However, once they settled issues relating to their children,
    that income was no longer available to them.

(iv)

After Separation

[19]

After
    separating from Howard in 2006, Linda significantly changed her lifestyle.  She
    quit her part-time job and for three years made no effort to find other work. 
    Eventually, in 2010, she took a part-time retail position with Swarovski
    Crystal, working 26 hours per week at $13 an hour.  She admitted, however, that
    she could earn more money working as an event planner, something she had done
    for several years.

[20]

Linda
    also began to live extravagantly.  She took 10 trips to Amsterdam.  She
    renovated and furnished her new home. And she paid her boyfriend $4,000 per
    month to help her decorate the home.  Overall she spent nearly $900,000,
    depleted her capital and went into debt.  The trial judge justifiably found
    that Linda is in debt because of the choices she made.

(d)

Discussion

[21]

Linda
    challenges both the amount and duration of the trial judges support order.  I
    will deal first with the amount.

[22]

In
    fixing the amount, as I have said, the trial judge imputed annual income of
    $30,000 to Linda.  Linda had asked to impute only $20,000, but I would not
    interfere with the trial judges figure.

[23]

The
    trial judge then considered the range stipulated by the Spousal Support
    Advisory Guidelines  between $4,050 and $5,400  and selected an amount at the
    lower end of the range, $4,500.  She noted that the children have their own
    income and the Applicant is capable of working.

[24]

Linda
    agrees that, though obviously not binding, the Spousal Support Advisory
    Guidelines are a useful benchmark for determining spousal support: see
Fisher
    v. Fisher
, 2008 ONCA 11, 232 O.A.C. 213.  But she argues that the trial
    judge erred by ordering an amount at the lower end of the range rather than the
    higher end of the range.  In support of her argument, she points to the following
    passage from the Guidelines:

Long marriages will generate generous spousal support awards on
    an indefinite basis that will provide the spouse with something approaching
    equivalent standards of living after marriage breakdown.

Alternatively, Linda asked for an equal division of net
    disposable income, which would yield monthly spousal support of approximately
    $7,700.

[25]

I
    would not interfere with the amount of spousal support ordered by the trial
    judge.  She did not err by looking to the Guidelines to arrive at a fair figure
    for support.  Even though I am inclined to agree that an award at the higher
    end would be appropriate, the monthly figure ordered by the trial judge cannot
    be considered alone.  It must be considered together with the lump sum support
    order of $119,956.34, the equalization amount that Howard overpaid in the
    interim domestic contract and agreed to forego in return for paying lower
    monthly support.  $119,000 is equivalent to monthly payments of $1,500 for 10
    years.  Thus, at least for 10 years, Lindas effective monthly spousal support
    is $6,000.  That figure is above the high end of the range established by the
    Guidelines for a without child support scenario and for a couple with the
    income or imputed income of Howard and Linda.  Accordingly, this court has no
    basis to adjust the amount of support ordered by the trial judge.

[26]

The
    duration of support raises a more difficult issue.  At various points in her
    analysis, the trial judge emphasized that Linda had not done enough to become
    self-sufficient.  At para. 29, the trial judge said:

I am not persuaded that the Applicant is working at her
    capacity or that duties associated with her children prevent her from working
    more hours than she currently is or at a higher level of employment.

At para. 31, the trial judge noted that [t]he demands
    from the children are less than they were seven years ago.  And, at para. 36,
    she said:

In this case, the Applicant has enjoyed the benefit of
    significant payments of spousal support; yet, she has not taken the opportunity
    to upgrade her skills, retrain or pursue other employment opportunities.  She
    has evinced an attitude of entitlement to a certain lifestyle and there is no
    basis for this.  The Applicant is young, in good health and is certainly able
    to take steps to move into becoming self sufficient or, if she chooses not to
    do so, she must adjust her lifestyle accordingly.

[27]

The
    trial judge concluded at para. 41 that time-limited support of 10 years was
    warranted:

If there is no material change in circumstances, after the
    expiry of 10 years, the Respondents obligation to pay spousal support shall
    terminate.  In my opinion, this is an appropriate period of time to recognize
    any economic disadvantage that was suffered by the Applicant by reason of the
    marriage and it promotes the economic self-sufficiency of the Applicant within
    a reasonable period of time, which is one of the primary purposes of any
    spousal support order.

In making this order, I am mindful of the fact that given the
    quantum of spousal support that the Respondent has been paying on a regular
    basis since April 2008, there is an argument that there has been an overpayment
    of spousal support.  My order has taken this into consideration and there shall
    be no issue taken by the Respondent with respect to past support payments.

[28]

In
    so far as is practicable, promoting the economic self-sufficiency of each
    spouse within a reasonable period of time is one of the four statutory
    objectives of a spousal support order: see
the
Divorce Act
, R.S.C. 1985 c. 3 (2
nd
Supp.), s. 15.2(6).  The
    trial judge was right to emphasize its importance in this case.  However,
    promoting self-sufficiency cannot be the only consideration that determines the
    duration of a support order.  The court also has to take into account the recipient
    spouses age, skills, education, opportunities for retraining and, importantly,
    her realistic prospects of being able to find a job that enables her to become
    self-sufficient: see
Tedham v. Tedham
, 2005 BCCA 502, 261 D.L.R. (4th)
    332, at para. 33.  Also, as this court noted in
Allaire v. Allaire
(2003), 170 O.A.C. 72, at para. 21, self-sufficiency is not a free-standing
    concept.  It must be seen in the context of the standard of living previously
    enjoyed by the parties.: see also
Fisher,
at para. 73.

[29]

Here,
    five undeniable facts stand out.  First, this was a long marriage:  it lasted
    20 years.  Second, during the marriage Linda was the one mostly responsible for
    maintaining the household and raising the children.  Third, Linda has not had a
    full-time job outside the home since the children were born.  Fourth, Howard
    and Linda lived well during their marriage:  they never had to worry about
    income.  Fifth, when the time-limited support order by the trial judge ends,
    Linda will be 56 years old.  In the light of these five facts, it seems to me
    unrealistic to impose a time limit on spousal support.

[30]

The
    Guidelines support this view.  They state that for long marriages  defined as
    marriages of 20 years or more  spousal support awards should be indefinite. 
    By indefinite support, the Guidelines do not mean permanent support or even
    support that will continue indefinitely at the level set by the formula, but
    instead support that is subject to the normal process of variation and review. 
    Through this process, the amount of support may be varied and support may even
    be terminated if the incomes of the parties change.  Also, and importantly for
    this appeal, the Guidelines caution at p. 61 that to ignore duration is to
    misapply the without child support formula:

Amount and duration are interrelated parts of the formula  they
    are a package deal.  Using one part of the formula without the other undermines
    its integrity and coherence.

[31]

Thus,
    I would follow the recommendation in the Guidelines.  Instead of imposing a 10
    year limit on spousal support for Linda, I would order that support be
    indefinite.  In addition, I would make the order subject to variation or
    termination on a material change in circumstances.

(2)

Were the Common Shares Howard received in the Estate Freeze a Gift?

[32]

The
    other highly contested issue between the parties was the intent and effect of
    the estate freeze undertaken in 1998 by Howards father Fred Reisman.  At
    trial, Lindas principal claim was that the estate freeze amounted to a
    fraudulent conveyance, a claim that the trial judge dismissed.  Although Linda
    maintains this claim on appeal, her main submission in this court is that the
    common shares given to Howard on the estate freeze were improperly excluded
    from his net family property as a gift.  If Linda succeeds in showing that the
    estate freeze was a fraudulent conveyance or that the common shares were not a
    gift, her equalization entitlement increases dramatically from the amount
    ordered by the trial judge, $106,581.66, to an amount in excess of $2,000,000.

[33]

In
    this section, I will consider Lindas submission that the common shares Howard
    received were not a gift.  In doing so, I will discuss Lindas admission that
    they were a gift, which the trial judge refused to permit her to withdraw  and
    which is one aspect of her argument that she was denied a fair trial.  In the
    next section of my reasons, I will consider Lindas fraudulent conveyance
    argument.  In doing so, I will consider the trial judges ruling that Howard
    could rely on his fathers affidavit, which is the other aspect of Lindas
    argument that she was denied a fair trial.

(a)

The Howard R. Trust

[34]

On
    the date of marriage, Howard was the beneficiary of the Howard R. Trust, which
    was settled by Fred Reisman in 1965.  Through its ownership of certain
    preference shares, the Trust held a 13.89% interest in the equity of MRL, a
    real estate holding company, which held income producing properties and land.  MRL
    was named for Howards mother Marian, but both it and the Trust were controlled
    by Howards father Fred.  Howard never personally received any distribution
    from his interest in the Trust.

[35]

Howards
    valuation expert, Bonnie Prussky, valued the Trusts 13.89% interest in MRL at
    $1,048,000.  The trial judge accepted that valuation.  Accordingly, that amount
    was appropriately deducted on Howards net family property statement as a date
    of marriage asset.

(b)

The 1998 Estate Freeze

[36]

In
    1998, on the recommendation of his financial advisors, Fred Reisman undertook a
    complicated reorganization and estate freeze of MRL. The purpose and mechanics of
    the estate freeze are concisely and admirably summarized by the trial judge at
    paragraphs 49-52 of her reasons.  I have reproduced her summary at Appendix A
    to these reasons.

[37]

The
    trial judge found, at para. 53, that the reorganization and estate freeze had
    three objectives:

·

(1) to freeze the value of the equity shares in MRL;

·

(2) to cause a distribution of trust to the children and
    grandchildren; and

·

(3) to protect the future growth in MRL in order to take
    advantage of exclusions under the [
Family Law Act,
R.S.O. 1990, c. F.3]
for gifted
    property.

[38]

This
    third objective is central to Lindas submission that the estate freeze was a
    fraudulent conveyance.  I will address this submission in the next section of
    these reasons.

[39]

For
    Howard, the estate freeze had two important consequences.  First, the
    preference shares of MRL held by his Trust were exchanged for frozen shares of MRL.
    Through a series of transactions, these frozen shares were converted into
    24,500 fixed value Class A common shares in Howardco., a holding company
    incorporated in the corporate reorganization.  The Howard R. Trust, along with
    five other Trusts, was then wound up.

[40]

Howard
    included these Class A common shares in his net family property.  Both Howards
    expert, Ms. Prussky, and Lindas expert, Neil Maisel, valued these shares at
    the date of separation.  The trial judge preferred Ms. Prusskys valuation,
    which was $1,193,000, and used that amount in calculating Howards net family
    property.  Linda does not challenge that valuation on appeal.

[41]

The
    second important consequence of the estate freeze was that Howard received from
    Fred Reisman 50 Class D common shares of MRL, which represented 25% of the
    future growth of MRL.
[2]
Howard then rolled these 50 Class D common shares into Howardco. in exchange
    for one Class B common share in Howardco.  Howards treatment of this one Class
    B common share in his net family property statement became a contentious issue
    at trial and remains so on appeal.

[42]

Howard
    took the position that this Class B common share was a gift from his father and
    thus was excluded from his net family property.  Linda initially agreed that it
    was a gift, but then sought to retract her position and argue that only the
    value of the share representing 11.11% of MRL was a gift and that the remainder
    ought to be included in Howards net family property  a position she reiterates
    on appeal.

[43]

In
    essence, Linda contends that Howard, through his Trust, went from owning a 13.89%
    interest in MRL at the date of marriage to owning a 25% interest after the
    estate freeze.  As the 13.89% was deducted from his net family property as a date
    of marriage asset, only 11.11% (25% less 13.89%) should be deducted as a gift. 
    To permit Howard to deduct the entire 25% as a gift would amount to double
    counting.

[44]

I
    do not agree with Lindas contention both because she admitted in an agreed statement
    of facts that the Class B common share was a gift, and because the evidence
    shows that it was a gift and treating it as one does not amount to double
    counting.

(c)

Lindas Admission that the Class B Common Share was a Gift

[45]

In
    October 2010, nearly a year before trial, the parties signed an agreed
    statement of facts.  The agreed statement included a joint net family property
    statement signed by both parties.  In this statement, Linda agreed that Howards
    1 Class B share was acquired by gift and was excluded from his net family
    property.
[3]
On a later net family property statement filled out by Linda alone, she again
    showed the Class B share as a gift to Howard and therefore excluded it from
    Howards net family property.

[46]

Not
    only did Linda admit that the Class B share was a gift, she did not allege
    otherwise in her pleadings.  In her Amended Statement of Claim, she attacked
    Howards receipt of the share as a fraudulent conveyance but did not claim that
    it was not a gift.

[47]

However,
    toward the end of the trial and in closing argument, Linda sought to withdraw
    her admission.  The trial judge refused to permit Linda to do so.  At para. 81
    of her reasons, she explained why:

In order to withdraw an admission, which is what changing the
    Agreed Statement of Facts would result in, there requires an explanation and
    well [
sic
] as demonstrating to the Court that any prejudice to the other
    party caused by the withdrawal can be compensated for in costs:
Forget v.
    Forget
.  In this case, there is no satisfactory explanation that has been
    put forward.  Further, it was during the course of trial that the issue was
    raised and in my view, the prejudice to the Respondent at that point could not
    have been compensated for by costs or an adjournment.

[48]

Linda
    now says that Ms. Prussky could have been asked to value Howards interest in
    the one Class B share of Howardco. and the court could have compensated Howard
    in costs by ordering Linda to pay for the valuation.  It seems to me that this
    would have been an unrealistic option in the middle of the trial, and it was an
    option that was never put to the trial judge.  I agree with the trial judges
    refusal to permit Linda to withdraw her admission, and I agree with the reasons
    for her refusal.

(d)

No Double Counting

[49]

Moreover,
    permitting Linda to withdraw her admission that the Class B share was a gift
    would not assist her.

[50]

Howard
    did not, as Linda claims, go from having an excluded 13.89% interest in MRL to
    having an excluded 25% interest in MRL.  At the date of marriage, he did not
    own  either legally or beneficially  an interest in MRL.  Rather, he had a
    beneficial interest in a trust, which had an interest in MRL, but which was
    entirely controlled by his father as Trustee.  Linda conceded that the value of
    this 13.89% interest in the trust was properly excluded from Howards net
    family property as a date of marriage asset.

[51]

On
    the estate freeze, the trust interest in MRL was converted into frozen shares
    of MRL and then converted again into fixed value Class A common shares in Howardco.,
    all at Fred Reismans sole discretion.  The difference between the value of the
    trusts interest in MRL at the date of marriage and the value of these Class A common
    shares at separation was appropriately included in Howards net family
    property.

[52]

In
    separate transactions, Fred Reisman gifted to each of his four children 50 Class
    D common shares of MRL, representing the future growth of the company.  In
    Howards case, his 50 Class D shares were converted into one Class B share in Howardco. 
    That one Class B share represented 25% of the increase in value of MRL since
    the estate freeze in 1998, not 25% of the value of MRL.  It was properly
    excluded on Howards net family property statement as a gift.

[53]

A
    gift is a voluntary transfer of property to another without consideration.  Typically,
    a gift has three elements:  an intention to donate, an acceptance and a
    sufficient act of delivery: see
Serra v. Serra,
2009 ONCA 105, 93 O.R. (3d) 161
.  On the
    evidence led at trial, all three elements were made out.  Fred intended to
    donate the 50 Class D shares to his son Howard and his other children; Howard
    accepted the donation, which was eventually converted into one Class B share in
    Howardco.; and the shares were actually delivered to Howard and his holding
    company.

[54]

Thus,
    Lindas double counting argument must fail.  There is simply no basis in the
    evidence to treat only part of the value of the Class B share as a gift.

(3)

Was the Estate Freeze a Fraudulent Conveyance?

[55]

Section
    2 of the
Fraudulent Conveyances Act
, R.S.O. 1990, c. F.29 gives
    creditors or others standing to set aside a conveyance of property made with
    a fraudulent intent:

Every conveyance of real property or personal property and
    every bond, suit, judgment and execution heretofore or hereafter made with
    intent to defeat, hinder, delay or defraud creditors or others of their just
    and lawful actions, suits, debts, accounts, damages, penalties or forfeitures
    are void as against such persons and their assigns.

[56]

Linda
    claimed that the estate freeze was a fraudulent conveyance contrary to s. 2
    because it was designed to intentionally reduce Howards net family property
    in the event of a breakdown of the marriage, and thus deprive her of the
    equalization payment to which she would otherwise be entitled.

[57]

The
    trial judge correctly recognized that the
Fraudulent Conveyances Act
can apply to equalization proceedings under the
Family Law Act
. 
    Nonetheless, she dismissed Lindas claim for two reasons.  First, relying on
    this courts decision in
Stone v. Stone
(2001), 55 O.R. (3d) 491
    (C.A.), the trial judge held that Linda was not a creditor of Howard at the
    relevant time, 1998, when the conveyance she challenges took place.  Second,
    the trial judge held that the estate freeze was not undertaken with an intent
    to defeat an equalization claim by Linda.  In finding the absence of a
    fraudulent intent, the trial judge relied on the affidavit of Fred Reisman,
    which set out the objectives of the estate freeze.  She concluded at para. 66
    of her reasons:

When the reorganization and estate freeze was done in 1998,
    there were legitimate purposes for undertaking the work, and there was no
    evidence to suggest one of the motives was to defeat the Applicants
    entitlement under the
FLA
.

[58]

Linda
    submits that in dismissing her s. 2 claim, the trial judge made three errors. 
    First, she ought to have found that Linda had standing to assert a claim under
    s. 2 as an other person.  Second, she ought not to have admitted or relied on
    Fred Reismans affidavit.  Third, on the question of Freds intent, she failed
    to take into account that one of the reasons for the estate freeze was to take
    advantage of the
Family Law Act
exclusions.  I would not give effect
    to any of these three submissions.

(a)

Creditors or others

[59]

In
Stone
, Feldman J.A. extensively canvassed the meaning of creditor
    and of creditors or others under s. 2 of the
Fraudulent Conveyances Act
. 
    She rejected the proposition that spouses are in a constant debtor-creditor relationship. 
    Instead, she held that the debtor-creditor relationship between married spouses
    arises only when one spouse has the right to claim an equalization payment from
    the other; in other words, a debtor-creditor relationship arises when one of
    the events triggering an equalization claim under the
Family Law Act
occurs: for example, on death, on divorce or on separation with no real
    prospect of the resumption of cohabitation.  Unquestionably, in 1998, Linda was
    not a creditor of Howard.  Back then she had no entitlement to an equalization
    payment.

[60]

Feldman
    J.A. also considered the long line of decisions interpreting creditors or
    others.  She noted that others includes persons who, though not judgment
    creditors at the time of the challenged conveyance, nonetheless have a claim
    for unliquidated damages.  Feldman J.A. concluded, at para. 25, that in the
    family law context:

In order for a spouse to qualify as a person who is intended to
    be protected from conveyances of property made with intent to defeat her interest,
    she must have had an existing claim against her husband at the time of the
    impugned conveyance that is a right which she could have asserted in an action.

[61]

Linda
    testified that she did not know about the reorganization and the estate freeze
    when it took place.  However, her lack of knowledge does not help her.  The claim
    Linda asserts is a claim to an equalization payment.  But she had no claim for
    equalization in 1998.  She does not claim, for example, that she would have
    even contemplated separation had she known about the estate freeze.  Thus, she
    was not an other person with standing to assert a claim under s. 2 of the
Fraudulent
    Conveyances Act
.

(b)

Admissibility of Fred Reismans Affidavit

[62]

At
    the beginning of the trial, Howard brought a motion to introduce the affidavit
    of his father Fred Reisman, sworn in November 2008, nearly three years before
    trial.  The affidavit had been filed in one of the several rectification
    proceedings needed to correct errors in the documents for the estate freeze. 
    In the affidavit, Fred described the estate freeze and said that it was
    undertaken at his sole discretion for legitimate tax, estate planning and
    family law purposes.

[63]

In
    his affidavit in support of his motion, Howard said that his father was 86
    years old, suffered from Alzheimers disease and serious memory loss, and could
    not give
viva voce
evidence at trial.

[64]

Howard
    attached to his affidavit a letter from Fred Reismans doctor who said that it
    would be pointless for Fred to give evidence at trial as his ability to
    recall past events and details was severely compromised.  The trial judge
    admitted the affidavit of Fred Reisman and then relied on it in finding that
    the estate freeze was not undertaken with a fraudulent intent.

[65]

Linda
    submits that the trial judge erred in admitting Fred Reismans affidavit. She
    makes the corollary submission that the trial judge ought not to have
    considered the letter from Freds doctor, as it was unsworn and he did not have
    any expertise on a persons fitness to testify.  Lindas overall contention is
    that the trial judges ruling prejudiced her and deprived her of a fair trial
    because she could not cross-examine Fred Reisman, the architect of the estate
    freeze.

[66]

This
    contention cannot succeed for three reasons.  First, Linda had several
    opportunities to cross-examine Fred Reisman and did not avail herself of any of
    them.  She had notice of the rectification application in which Fred Reismans
    affidavit was filed.  Indeed, Goodmans LLP, the law firm that acted for Fred
    Reisman, agreed to Lindas request to adjourn the rectification application so
    that she could put in responding material and cross-examine her father-in-law. 
    She did neither.  In addition, at no time in the matrimonial proceedings did
    Linda seek to add Fred Reisman as a party and examine him.  Finally, two months
    before trial, Howards lawyer put Linda on notice that she was not going to
    call Fred Reisman as a witness at trial.  Again, Linda did not subpoena Fred
    Reisman or ask to examine him.

[67]

Second,
    Linda filed no evidence to contradict the opinion of Howard and of Freds
    doctor that Fred was incapable of testifying.

[68]

Third,
    I do not think that Freds unavailability to testify at trial prejudiced
    Linda.  The Goodmans lawyer who dealt with the rectification application did
    testify at trial and gave evidence about the objectives of the estate freeze,
    which corroborated Freds affidavit evidence.  Those objectives were hardly
    controversial.

[69]

Accordingly,
    I conclude that the trial judge did not err in exercising her discretion to
    admit Fred Reismans affidavit and rely on it.

(c)

Intent

[70]

Linda
    argues that in finding no fraudulent intent, the trial judge erred because she
    did not consider that one of the objectives of the estate freeze was to take
    advantage of the exclusions for gifted property under the
Family Law Act
. 
    I do not accept this argument.

[71]

The
    trial judge was well aware that taking advantage of the exclusions was one of
    the objectives of the estate freeze.  She said so explicitly at para. 53 of her
    reasons.  However, she found that estate planning and tax considerations mainly
    prompted Fred Reisman to undertake the estate freeze.  That finding is entitled
    to appellate deference and I see no basis to interfere with it.

[72]

The
    estate freeze took place in 1998, nine years before Linda and Howard separated. 
    Linda did not testify about any marital discord at the time or suggest that she
    would have considered separating from Howard had she known about the estate
    freeze.  Moreover, Linda maintained that she had an excellent relationship with
    Fred Reisman.  And she has made no complaint about the portion of the estate
    freeze that benefitted Fred Reismans 13 grandchildren, including her own four
    children.

[73]

The
    facts of this case differ significantly from the facts in
Stone
.  In
Stone
,
    the husband, with his death imminent, conveyed virtually all of his property to
    the children of his former marriage.  He did so without telling his wife and
    with the obvious intent to deprive her of a fair equalization payment.  The
    trial judge found that the husbands dispositions amounted to fraudulent
    conveyances and this court upheld his finding.

[74]

On
    the facts of the case before us, no fraudulent intent lay behind the estate
    freeze.  It was a legitimate transaction undertaken by Fred Reisman to preserve
    his familys wealth.  The trial judge was therefore correct in dismissing
    Lindas claim under s. 2 of the
Fraudulent Conveyances Act
.

(4)

Did the Trial Judge Err in her Costs Award?

[75]

The
    trial judge awarded Howard costs of $250,000, payable by Linda over 10 years,
    in equal monthly installments of $2,083.33, unless Howards obligation to pay
    spousal support ends earlier, in which case the entire amount remaining would
    become due and payable.  The trial judge also ordered that the costs award be
    enforced as a support order under the
Family Responsibility and Support Arrears
    Enforcement Act, 1996
, S.O. 1996, c. 31.  Linda challenges both the amount
    of costs ordered and the schedule of payments.

(a)     Amount

[76]

Howard
    made three offers to settle, each on terms more favourable to Linda than she
    obtained at trial.  Thus, the $250,000 order reflects partial indemnity costs
    to the date of the first offer in February 2010, and full indemnity costs after
    that date.  Linda does not contest the scale of costs.

[77]

Linda
    does, however, submit that the amount of costs is excessive.  I do not see any
    basis to interfere with the amount ordered.  The trial judge applied the proper
    principles:  she took into account the cost factors in Rule 24 of the
Family
    Law Rules
and arrived at a figure that she considered fair and
    reasonable.  In doing so, she concluded that the substantial disbursements for
    expert fees were reasonable because of the importance and complexity of the
    issues arising out of the estate freeze, but that the hours charged by Howards
    lawyers were excessive.  As the trial judge exercised her discretion reasonably
    and gave reasonable explanations for her award, I would uphold the amount she
    ordered.

(b)     Schedule
    of Payments

[78]

The
    trial judge tied Lindas obligation to pay the costs award to her receipt of
    spousal support.  The net result under the trial judges order is that for the
    period Linda receives spousal support, she will receive only $2,416.67 monthly
    ($4,500 - $2,083.33).

[79]

As
    I would set aside the 10 year upper limit on spousal support, I would correspondingly
    reduce the monthly amount Linda is required to pay to satisfy the costs award. 
    I would order that she pay the costs award of $250,000 at the rate of $1,000
    per month.  That will leave her with net monthly spousal support of $3,500.

[80]

If
    Lindas entitlement to spousal support ends, she must then pay the outstanding
    amount of costs.  The trial judge ordered that the costs award be enforced
    under
the
Family
    Responsibility and Support Arrears Enforcement Act, 1996
.  Linda did not
    challenge this order on appeal.

C.

Conclusion

[81]

I
    would not interfere with the amount of spousal support ordered by the trial
    judge.  However, I would set aside the 10 year limit ordered by the trial
    judge, and in its place order that spousal support be paid to Linda indefinitely,
    but subject to variation or termination on a material change in circumstances.

[82]

I
    would not give effect to any of Lindas arguments arising out of the estate
    freeze.

[83]

I
    would vary Lindas obligation to pay the costs award from $2,083.33 monthly to
    $1,000 monthly.

[84]

The
    parties may make written submissions on the costs of the appeal within three
    weeks of the release of these reasons.

Released: February 11, 2014 (AH)

John Laskin J.A.

I agree  Alexandra Hoy
    A.C.J.O.

I agree  M. Tulloch J.A.




Appendix A

[49]    Since the existing trusts
    were approaching the deemed disposition date, in order to defer the taxes on
    future growth and provide some protection against family law issues, it was
    determined to do an estate freeze, which is a mechanism by which future growth
    in a company is transferred, and the freeze is usually intergenerational.  The
    objective of an estate freeze is to deal with the tax on the trust, because
    every trust is deemed to dispose of its assets every 21 years and is required
    to pay tax.

[50]    It was decided to wind up the trusts, freeze the value
    of the MRL shares they owned and transfer the frozen value to Fred and Marian,
    their children and grandchildren.  In addition, a new trust was created,
    F&M GrandKidsCo, for the 13 grandchildren of Fred and Marian and 26% of the
    frozen value was transferred to this new company.  The frozen share in MRL was
    replaced by new equity shares which were gifted to Freds children.  Exhibit 9,
    tab 60 contains a chart prepared by the lawyers who acted on this transaction,
    showing the steps related to the 1998 MRL freeze.  Since the passage of the
Family
    Law Act
in 1986, such gifted shares are considered excluded property.

[51]    To put it simply, the value of the MRL shares was
    frozen and new classes of shares were created.  Howard R. Trust received 24,500
    Class A Special Shares in exchange for the shares it owned in MRL.  Fred gifted
    50 Class D Common Shares of MRL to Howard.  1330650 Ontario Inc. [Howardco]
    was incorporated as a holding company and Howard subscribed for one Class D
    Common Share.  Howard R. Trust transferred its 24,500 frozen shares of MRL to
    Howardco in exchange for 24,500 Class A Common Shares.  Howard then rolled the
    50 Class D Common Shares of MRL which had been gifted to him by Fred into
    Howardco for one Class B Common share.  Howardco then sold 24,500 Class A
    Special Shares in MRL to MRL in exchange for 50 Class D Common Shares in MRL. 
    There was a period of perhaps 10 days when Howardco had retractable shares. 
    Each child of Fred was treated in the same manner in the estate freeze, as they
    each received 25% of the MRL shares.

[52]    The final allocation was that Howard had one Class D
    Common Share in Howardco and all of his siblings subscribed for one Class D
    share in their own holding company; 24,500 Class A Common Shares in Howardco;
    and one Class B Common Share in Howardco.  It is to be noted as well that
    Howardco had 100 Class D Common Shares in MRL which are neither redeemable nor
    retractable.  Howardco had no other material assets.  Following the
    reorganization, Fred continued to control MRL.





[1]
The trial judge awarded Linda an equalization payment that was $119,956.34 less
    than the amount Howard had paid under the interim domestic contract.  Howard
    agreed to waive repayment of this amount on the understanding that it would be
    treated as lump sum spousal support: see paras. 7 and 8 of these reasons.



[2]
Each of Howards three siblings similarly received 50 Class D common shares of MRL.



[3]
Neither party valued the Class B share, but in my opinion nothing turns on
    their failure to do so.


