



COURT OF APPEAL FOR ONTARIO

CITATION: Rados v. Rados, 2019
    ONCA 627

DATE: 20190724

DOCKET: C66206

Hoy A.C.J.O.,
    Trotter and Jamal JJ.A.

BETWEEN

Laurie Anne Rados

Applicant (Respondent)

and

Michael Rados

Respondent (Appellant)

Nicholas J. Cartel and Glenn Brandys, for the appellant

Aaron Franks and Adam Prewer, for the respondent

Heard: July 18, 2019

On appeal from the order of Justice Caroline E. Brown of
    the Superior Court of Justice, dated March 26, 2018.

REASONS FOR DECISION

[1]

The appellant appeals from orders relating to the division of net family
    property and spousal support. The principal issues relate to the trial judges decisions:
    (1) to discount by 90%, for equalization purposes, a $5,000,000 promissory note
    that the appellant had signed on behalf of his personal holding company in
    favour of his parents, in respect of a loan to finance a condominium project
    during his marriage to the respondent; and (2) to award spousal support to the
    respondent for an indefinite period.

[2]

None of the trial judges other orders are challenged, including the claims
    for divorce, child support, or the quantum of spousal support.

[3]

Following the oral hearing, we dismissed the appeal with costs, with
    reasons to follow. These are our reasons.

Background

[4]

The parties were married in October 1995 and separated in December 2012.
    Their two children were born in 1998 and 2001. The appellant is a pilot who has
    been employed by Air Canada since 2000. The respondent was employed as a
    part-time x-ray technician at the time of her marriage, but she stopped working
    for a period due to language barriers when they lived in Quebec and then to care
    for their children. She returned to work part-time in 2009, but in 2014 stopped
    working again because of serious health issues. She is currently retraining to
    become an MRI technician, although that is on hold because of her health challenges.

[5]

In addition to working as a pilot, the appellant was involved in a substantial
    condominium development project to build 46 residential units in Grimsby,
    Ontario. Between 1994 and 1996, the appellant bought the land for the project.
    In 2000, he incorporated a numbered company, 1502418 Ontario Inc., of which he
    was the sole officer and shareholder. The company later became the owner of the
    land and built two buildings as part of the project, while the appellant
    controlled the day-to-day construction operations.

[6]

The appellant testified that the project cost over $8,000,000 to
    complete. He was initially unable to obtain outside financing, so his father, a
    real estate entrepreneur, stepped in to provide funding. The appellant also
    used funds from a joint line of credit secured against the matrimonial home,
    credit card advances, and funds from his employment income. The appellant
    obtained third party financing beginning in around 2004.

[7]

The project began in late 2003 and was completed in 2007. In early 2008,
    the appellant signed a promissory note, on behalf of the numbered company, in
    favour of his parents in the amount of $5,000,000 as a demand loan. The promissory
    note did not provide that interest was payable. The company made no payments
    under the note until July 2013, after the appellant and respondent had
    separated. Further periodic payments were made between 2013 and 2016.

[8]

The appellants evidence at trial was that his father had advanced the numbered
    company about $3,700,000 for costs related to the project, while the remaining $1,300,000
    was a risk premium. The appellant testified that the funding was always
    intended to be a loan, not a gift. He said that he and his father agreed that
    he would begin repaying the loan, with interest, as the condominium units were
    sold and after the financial institutions were repaid.

[9]

The respondent acknowledged that the appellants father had funded the
    condominium project, and while she was not aware of the financial discussions
    with the father, she was certain that they were not expected to repay him. She
    testified that shortly before she and the appellant separated, the appellant
    had told her that they had no debt. She learned of the promissory note only through
    her lawyer after the couple had separated. She also testified that the
    appellants father had specifically told her, more than once, that the money he
    had provided was for the family and that the couple did not owe him anything.

The trial judges findings

[10]

The
    13-day trial included an agreed statement of facts, but the trial judge also
    heard testimony from the parties, the appellants and his parents accountant,
    and the appellants mother. The appellants father had passed away in 2016.

[11]

The
    trial judges 118-page reasons comprehensively reviewed the parties evidence, made
    credibility findings, and canvassed the applicable law.

(1)

The discounting of the promissory note

[12]

The
    trial judge accepted that the appellants father had funded the project and that
    a $5,000,000 corporate debt existed on the date of separation: paras. 263-264.

[13]

The
    trial judge also reviewed the case law permitting the court, when calculating
    net family property, to discount a debt owing by a spouse to reflect the
    likelihood that the spouse would ever be called to repay the debt: paras.
    229-235, citing
Salamon v. Salamon
, [1997] O.J. No. 852 (Gen. Div.);
Poole
    v. Poole
(2001)
, 16 R.F.L.
    (5th) 397 (Ont. S.C.); and
Cade v. Rotstein
, 2002 CanLII 2811 (Ont. S.C.),
    affd (2004), 181 O.A.C. 226 (C.A.).

[14]

Applying
    this legal principle to the evidence  including 33 specific factors regarding
    the timing and circumstances of the promissory note and whether the corporate
    loan was ever expected to be repaid (para. 274)  the trial judge found that
    any monies advanced by the appellants parents to the corporation were
    advanced for the future benefit of [the appellant] (and his family) and that
    there was almost certainly no intention that the monies were to be repaid:
    para. 275. She found that the prospect of a call for repayment was extremely
    unlikely and close to non-existent, but it was difficult to say with one
    hundred percent certainty that there was absolutely no possibility whatsoever:
    paras. 276, 278.

[15]

Accordingly,
    the trial judge found that the debt was a contingent liability that had to be significantly
    discounted: para. 277.

[16]

Based
    on her appreciation of all the evidence, the trial judge exercised her discretion
    to discount the promissory note by 90% of its face value as a true reflection
    of the practical reality: para. 279.

[17]

The
    trial judge also rejected the appellants alternative claim that, if the funds
    were not a debt, then they were a gift, to be excluded when considering the corporations
    value pursuant to s. 4(2) of the
Divorce Act
, R.S.C. 1985, c. 3 (2nd
    Supp.).
The trial judge noted that, during opening
    submissions, the appellants trial counsel had taken the position that the
    monies were not a gift: para. 283. The appellants evidence was to the same
    effect: para. 287 (emphasis in original). In the circumstances, the trial judge
    found that it would be unfair and inappropriate to consider this alternative
    position in closing argument: para. 290.

(2)

The award of indefinite spousal support

[18]

On
    the issue of spousal support, the respondent had argued that spousal support
    should be payable indefinitely, while the appellant did not make any
    submissions on this issue: para. 545. The trial judge ordered indefinite
    spousal support based on the circumstances of this case, including the age of
    the parties, the duration of the marriage, and the respondents longstanding
    health issues, which have impacted her ability to maintain employment, as well
    as the compensatory nature of spousal support: paras. 546-548.

Issues on appeal

[19]

The
    appellant raises two grounds of appeal:

1.

Did the
    trial judge err in discounting the promissory note by 90%?

2.

Did the
    trial judge err in ordering indefinite spousal support without imposing
    periodic reviews or an end date?

Analysis

(1)

Did the trial judge err in discounting the promissory note by 90%?

[20]

The
    appellants first ground of appeal raises three points.

[21]

First,
    the appellant says that the trial judge made a palpable and overriding error by
    discounting the promissory note by 90%. The appellant says that several of the
    33 factors considered by the trial judge involved irrelevant considerations,
    and if these are excluded, what remains could not justify the discount applied.

[22]

We
    do not agree with this submission.

[23]

Substantial
    deference is owed to the trial judges determinations of fact and mixed fact
    and law, especially in family law cases. This court will interfere only where
    the fact-related aspects of the judges decision in a family law case exceeds a
    generous ambit within which reasonable disagreement is possible and is plainly
    wrong:
Johanson v. Hinde
, 2016 ONCA 430, at para. 1.

[24]

The
    trial judge correctly considered the applicable law. The case law relied on by
    the trial judge is consistent with this courts
guidance
    in
Zavarella v. Zavarella
, 2013 ONCA 720, 117 O.R. (3d) 641, at para. 40
,
that
the debt is to be valued
    based on the reasonable likelihood that it will ever be repaid.

[25]

The
    trial judges application of that law to the facts and her decision to discount
    the promissory note by 90% as a true reflection of the practical reality of the
    situation is owed substantial deference.

[26]

We
    also do not agree that any of the factors listed by the trial judge were irrelevant.
    She set out the nature of the parties relationship based on all the evidence and
    evaluated whether there was any reasonable likelihood that there would ever be
    a call to repay the debt. We see no basis to interfere.

[27]

Second,
    the appellant argues that the trial judge erred in piercing the corporate veil
    in respect of the appellants numbered company.

[28]

We
    do not agree with this submission.

[29]

In
    our view, the trial judge did not pierce the corporate veil. In his Form 10:
    Answer of the Respondent Michael Rados dated December 12, 2013, filed with the
    court for purposes of the division of net family property, the appellant
    stated: I do own a corporation that owns a condominium development (the
    condominium project). I am sole shareholder of the corporation. The trial
    judge then appropriately considered the true value of the corporations debt to
    the appellants parents. The trial judge analyzed the role of the appellant and
    his corporation separately, concluding that the possibility that the
    [appellant]
or his corporation
would have been called upon by his
    parents to ever repay them the monies they had advanced was extremely
    unlikely: para. 276 (emphasis added). Thus, the trial judge respected the
    corporations separate legal personality from the appellant.

[30]

Third,
    in his factum, the appellant argues in the alternative that the trial judge
    erred in failing to find that the demand loan to the corporation was a gift.
    This argument was not pursued at the hearing of the appeal.

[31]

In
    our view, the trial judge was entitled to conclude that it would be unfair to
    permit this new theory to be advanced during closing argument, especially in
    view the appellants evidence and his counsels opening submissions disclaiming
    this theory. We see no basis to interfere.

(2)

Did the trial judge err in ordering indefinite spousal support without
    imposing periodic reviews or an end date?

[32]

Finally,
    the appellant argues that the trial judge erred in awarding indefinite spousal
    support. He says that the trial judge should have ordered a periodic review of
    spousal support every five years, to expire when the appellant reaches age 65.

[33]

We
    do not agree with this submission.

[34]

As
    the trial judge noted, at trial the appellant did not make any submissions on
    the claim for indefinite spousal support.

[35]

Even
    if it were open to the appellant to take this position for the first time before
    this court, we see no basis to interfere. The trial judge exercised her
    discretion to order indefinite spousal support having regard to the age of the
    parties, the duration of the marriage, the respondents health issues that have
    impacted her employment, and the compensatory nature of spousal support. That
    exercise of discretion was reasonable in the circumstances.

Disposition

[36]

For
    these reasons, the appeal is dismissed with costs fixed at $18,500, plus the applicable
    HST.

Alexandra Hoy A.C.J.O.

G.T. Trotter J.A.

M.
    Jamal J.A.


