DATE: 20010430
DOCKET: C33776
MORDEN, MOLDAVER AND MACPHERSON JJ.A.
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NICOLA JANE ADAMS |
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Ian R. Fisher for the respondent |
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Petitioner (Respondent) |
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HOWARD FRANKLYN ADAMS |
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Terry W. Hainsworthfor the appellant |
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Respondent (Appellant) |
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HEARD: January 25, 2001 |
On appeal from the judgment of Justice Terrence Patterson dated February 2, 2000.
MACPHERSON J.A.:
[1] Dr. Howard Adams and Mrs. Nicola Adams separated in 1996 after a 17-year marriage. Dr. Adams was a successful plastic surgeon in Windsor. Mrs. Adams was a qualified nurse. However, throughout most of the marriage she stayed at home to look after the children.
[2] In the divorce proceedings which followed the separation, many matters were resolved by agreement of the parties. However, differences arose with respect to child and spousal support and two components of the equalization of family property, namely Dr. Adams’ membership in a golf club and the mortgage payments he made after the separation. These issues were determined by Patterson J. in written reasons released on February 2, 2000. Dr. Adams has appealed the trial judge’s decision on these issues.[1]
(1) The parties and the events
[3] In 1977, Howard Adams was completing his residency in plastic surgery at Montreal General Hospital. In the same year, Nicola Adams, a young British nurse, came to Canada. She obtained employment as an operating room nurse at Montreal General Hospital. Howard and Nicola met and, after a courtship of approximately one year, married in a ceremony in Southampton, England in May 1979.
[4] In July 1980, the Adams’ first son was born. Mrs. Adams left her employment as a nurse. Essentially, from that time forward, she devoted herself “to be a house maker and raise the children”. Four more sons were born in 1982, 1986, 1988 and 1989. Another child was stillborn in 1984.
[5] In 1981, following the completion of Dr. Adams’ residency, the family moved to Windsor. Dr. Adams established a practice in his specialty of plastic surgery. He has a busy and successful practice which includes operating privileges at two hospitals in Windsor.
[6] The parties separated in October 1996. Following the separation, until the pronouncement of an interim support order in June 1998, the parties had no formal financial arrangements. Dr. Adams paid the bills and provided Mrs. Adams with additional cash. The children continued to reside in the matrimonial home with their mother. Dr. Adams resided in an apartment in Windsor.
[7] Pursuant to the interim support order in June 1998, Mrs. Adams became responsible for all of the household expenses. Dr. Adams paid interim child support of $7327 a month and interim spousal support of $2700 a month.
(2) The divorce proceedings
[8] In September 1997, Mrs. Adams commenced divorce proceedings. The parties were able to resolve many issues. However, several issues became intractable and proceeded to trial before Patterson J. in January 2000.
[9] There was a major disagreement on the question of spousal support. Mrs. Adams sought $7000 per month; Dr. Adams proposed $3000.
[10] There was a minor disagreement on the issue of child support. The parties agreed that Dr. Adams’ obligation to pay child support should follow the Child Support Guidelines (Family Law Act), O. Reg. 391/97 (“Guidelines”). However, they disagreed about how Dr. Adams’ income should be calculated for the purpose of quantifying this obligation. Dr. Adams took the position that his income for 1998 – $372,220 – should be used. Mrs. Adams submitted that her husband’s average income for 1996, 1997 and 1998 – $388,184 – was the proper basis for the calculation.
[11] With respect to the equalization of net family property, the parties disagreed on two matters, one minor and the other major.
[12] The minor issue related to Dr. Adams’ membership in a golf club and whether it constituted “property” and had “value” within the meaning of the s. 4 of the Family Law Act, R.S.O. 1990, c.F-3. It was common ground that the initiation fee to join the golf club, on the valuation date in October 1996, was $16,000 and that Dr. Adams could not transfer or sell the membership.
[13] The major issue related to the fact that between the date of separation (October 1996) and the date of the sale of the matrimonial home (September 1998) Dr. Adams made payments that reduced the mortgage from $260,421 to $180,757. Dr. Adams claimed that he should receive credit for the almost $80,000 of reduced debt in the equalization calculation. Mrs. Adams contended that the payments were voluntary and were intended by Dr. Adams to confer a benefit on the family.
[14] On three of these issues, the trial judge found in favour of Mrs. Adams. On the spousal support issue, he chose an amount, $5000, midway between the parties’ submissions. Dr. Adams appeals his decision on all four issues.
[15] The issues raised by this appeal are:
(1) For the purpose of calculating child support, did the trial judge err by calculating the appellant’s income on the basis of an averaging of the last three years income rather than on the basis of his income in the single year immediately preceding the trial?
(2) Did the trial judge err by setting spousal support at $5000 per month?
(3) Did the trial judge err by including Dr. Adams’ membership in a golf club as matrimonial property subject to equalization?
(4) Did the trial judge err in the manner in which he treated the post-separation mortgage paydown payments made by the appellant?
(1) Child Support
[16] At the time of trial, the five Adams sons ranged in age from 10 to 20 years. Four of the sons qualified as “children of the marriage” within the meaning of the Divorce Act, R.S.C. 1985, c.3 (2nd Supp.). Before the trial, the parties agreed that support would be assessed for these sons without regard to the fact that Dr. Adams’ income was over $150,000. Moreover, Mrs. Adams advised that she would not advance a claim for “special and extraordinary expenses” pursuant to s. 7 of the Guidelines. Accordingly, the parties were agreed that child support should be set in accordance with the table amounts in the Guidelines. This agreement required the trial judge to fix Dr. Adams’ income. In 1995-1998, Dr. Adams earned $371,299, $388,232, $404,100 and $372,220 respectively. At trial, Dr. Adams took the position that, for calculation purposes, his income should be declared to be his latest yearly income, $372,220, which would produce a child support obligation of $6222 monthly. Mrs. Adams countered with a submission that the income from the last three years should be averaged, producing a figure of $388,184, and monthly child support payments of $6474. In short, the difference between the parties on the issue of child support was a relatively minor $252 monthly.
[17] The trial judge accepted Mrs. Adams’ position. He held that using “the income over the last three years as an average for the support guidelines for the children is the fairest approach”. In my view, this conclusion is sound. It is explicitly grounded in s. 17(1) of the Guidelines:
17(1) Pattern of income– Where the court is of the opinion that the determination of a parent’s or spouse’s annual income from a source of income under section 16 would not provide the fairest determination of the annual income from that source, the court may determine the annual income from that source,
(a) where the amount in respect of the source of income has increased in each of the three most recent taxation years or has decreased in each of those three years, to be the amount from that source of income in the parent’s or spouse’s most recent taxation year;
(b) where the amount in respect of the source of income has not increased or decreased as described in clause (a), to be the average of the amount received by the parent or spouse from that source of income in the three most recent taxation years, or such other amounts, if any, that the court considers appropriate; . . .
[Emphasis added.]
[18] Dr. Adams’ income increased from 1995 to 1996 and from 1996 to 1997. However, it decreased from 1997 to 1998. Accordingly, his situation came squarely within clause (b) of subsection 17(1) of the Guidelines. It was entirely permissible for the trial judge to exercise his discretion and apply the three year average to Dr. Adams’ income.
(2) Spousal Support
[19] The parties’ disagreement on the issue of child support was a relatively minor $252 per month. Their disagreement with respect to spousal support was major; Mrs. Adams sought $7000 monthly; Dr. Adams proposed $3000.
[20] The trial judge reviewed both positions and decided that spousal support of $5000 monthly was appropriate:
It is my opinion that support payments should be $5,000 per month as this amount more properly reflects the standard of life that Mrs. Adams was accustomed to during the marriage and is reflective of the fact that she is a full-time caregiver of four boys who range in age from 11 to 18 years of age. The fifth boy who is not presently residing at home apparently will be living at home starting in September of 2000 to continue his studies. [Emphasis is trial judge’s.]
[21] The appellant submits that the combination of child and spousal support leaves Dr. Adams with only 40 per cent of the family’s disposable income. He contends that this is too low and that spousal support should be lowered to $3000 monthly which would produce an allocation of disposable family income between Dr. and Mrs. Adams closer to a 50:50 ratio.
[22] In a comprehensive annotation about this court’s decision in Andrews v. Andrews (1999), 50 R.F.L. (4th) 1 at 2 (Ont. C.A.), Professor James McLeod discussed the pre-Andrews jurisprudence and observed that there “appeared to be an emotional barrier to leaving a payor with less than half of a payor’s income as support”.
[23] In Andrews, the trial judge awarded child and spousal support totalling about 60 per cent of the disposable family income. This court chose not to interfere with the trial judge’s allocation. Laskin J.A. said, at pp. 15-16:
In percentage terms, the trial judge’s orders for child support and spousal support allocate 40% of the parties’ total net disposable income to Mr. Andrews and 60% to Mrs. Andrews. To justify interfering with the order for spousal support, I would have to be persuaded that this allocation is unreasonable or outside an acceptable range. However, I find nothing unreasonable in allocating 60% of the parties total net disposable income to Mrs. Andrews, who has been economically disadvantaged by a 17 year marriage and who has the responsibility for caring for the three children, two of whom have special needs.
[24] Professor McLeod’s comment on this aspect of the court’s decision in Andrews was: “The court’s decision not to interfere with the trial judge’s conclusion on this point amounts to little more than confirmation of the obvious – it costs more to maintain four persons than to maintain one”. (at p. 2).
[25] I cannot conclude that the trial judge’s allocation of disposable family income in the present case was, in the words from Andrews, “unreasonable or outside an acceptable range”. Mrs. Adams left her own career early in the marriage and stayed at home to raise five children. After the separation, the parties sold their matrimonial home for $935,000. With her share of the proceeds of this sale, Mrs. Adams bought another home on the same street – for $315,000. Four of the sons continue to live with her, and the eldest son was expected to return from Australia in September 2000 to live with his mother and brothers. It is true that, unlike in Andrews, none of the children has special needs. However, there are five boys living with their mother in one home. Acknowledging that the child support payments will cover most of the sons’ needs, spousal support of $5000 monthly is not unreasonable in the context of the family history and current situation.
[26] Moreover, a review of the trial record does not suggest even a hint of extravagance on the part of Mrs. Adams.
[27] Referring to her estimate of $350 monthly for house repairs and maintenance, Mrs. Adams testified:
A. Oh, because, because particularly this year I’ve actually had to replace a fence, so that was put up and, and done. I had, I patched a roof which will need doing eventually. I think I mentioned before I had, windows had to be replaced, a couple. They were rotten. These are significant things apart from smaller things, and doors, there were a couple of doors, well, actually I had to replace all the doors just for insulation. This house is an older home so it does require some repairs, and I’ve been lucky enough to find a handy man who works very reasonably, but I, there are certain things I just can’t do alone, and I have to employ some help.
[28] Referring to the family’s food needs, Mrs. Adams testified:
Q. Okay. Item 15, groceries. There’s yourself and the four children at home?
A. Yes.
Q. And how did you arrive at the figure of $250 a week for groceries?
A. Well, with great difficulty. I, I can’t say that I write every detail down when I buy things, there’s just no time, so I’m assessing that that’s what I pay. I know that when I get out of Price Club I’ve got a three or $400 bill more often than not.
Q. All right.
A. I, I know that I very rarely come out of Zehr’s under 200, I know that, but I have not kept every receipt and itemized it, I must confess.
[29] Referring to her general financial situation, Mrs. Adams testified:
Q. Okay. Has there been any difference in spending for yourself or the children since you separated from Dr. Adams?
A. Oh, I think I’ve, you know, certainly come to terms with the fact that, you know, I’m not secure right now, and I haven’t, I’ve become more careful. I mean, I have certainly had a comfortable lifestyle before and I was very fortunate, but now I feel a little differently, and yes, I think I’ve cut the bills back significantly.
[30] In summary, I do not see any reason to interfere with the trial judge’s decision to set spousal support payments at $5000 monthly. This allocation is not “unreasonable or outside an acceptable range”, viewed either in isolation considering Mrs. Adams’ history and current circumstances, or in conjunction with child support payments of $6474 monthly.
(3) The golf club membership
[31] On the issue of the equalization of net family property, the parties had a minor (in terms of dollar value) disagreement relating to Dr. Adams’ membership in a golf club.
[32] In 1982, Dr. Adams joined the Beach Grove Golf and Country Club. The initiation fee was $2,500. On the valuation date in October 1996, the initiation fee was $16,000. Over the years, all members of the Adams family made extensive use of the club. Dr. Adams used it for professional entertainment purposes and he was an avid golfer. Mrs. Adams and the five sons used the club, to varying extents, for golf, swimming and curling. The family often dined at the club.
[33] The trial judge held that the membership was property and that it had a value and was, therefore, subject to equalization. He said:
Though technically this asset may be viewed as personalty, I believe it is important to look at it as an asset in terms of its actual use. There is no question that Dr. Adams personally used the membership and, used it as part of his business promotion to golf with fellow physicians who could be a source of referral to him. Despite this, I am of the view that the use made by all members of the family including the five boys that this asset should be looked at in terms of its use as a family amenity and its character is such that it falls within “property” as defined by the Divorce Act. I am also of the view that the word property within the Divorce Act which includes “any interest” is broad enough to include a club membership of the type in dispute for equalization purposes despite the fact that it may not be sold or inherited.
[34] The trial judge then turned to the question of value. He reasoned:
I have not heard any evidence as to the value that this membership would have taking into account the availability that it will give to the boys. It is my view that it would be fair to assume that on the basis that the membership is worth $16,000 that the sum of $12,000 be included in the assets of Dr. Adams for equalization purposes. Therefore, I value the right of the boys (until age 19) to continue to use the full club access membership to Beach Grove as being $4,000. As I did not receive evidence regarding this valuation I am prepared to hear from both counsel in this regard.
[Emphasis is trial judge’s.]
[35] The appellant submits that the trial judge erred in his conclusions relating to property and value. The appellant’s central submission is, as expressed in his factum, that “[t]he golf club membership does not constitute property within the meaning of the Family Law Act as it is merely a personal licence”.
[36] On the basis of the record, in my view there was insufficient evidence on which the trial judge could properly determine this issue. There was no documentation about the golf club membership; nor did the testimony of the only two witnesses, Dr. and Mrs. Adams, sufficiently clarify the nature of the membership. It is clear that the membership is in Dr. Adams’ name and that it cannot be sold or transferred. However, it is not clear whether the membership is a single men’s membership, a spousal membership or a family membership. In short, it cannot be determined what privileges the membership confers on Dr. Adams and the members of his family.
[37] The issue of membership in various clubs, including golf, yacht and dining clubs, in a family property context has arisen in several cases in British Columbia. In all of those cases, there was, in my view, a much clearer picture about the nature of the membership than there is in the present case. For example, in Eilers v. Eilers, [1997] B.C.J. No. 1861 (S.C.), there was no fee payable for the junior memberships for the children. In Lunden v. Lunden, [1990] B.C.J. No. 875 (S.C.), the trial judge reviewed the history of the origins of the family golf membership and concluded that the wife should retain it while the husband should be given an opportunity to apply for a new membership. In McComb v. McComb, [1990] B.C.J. No. 1613 (S.C.), the trial judge discussed the concepts of principal member and affiliate member in a yacht club context. In Leckie v. Leckie, [1995] B.C.J. No. 671 (S.C.), there was strong evidence that two dining club memberships held by the husband were not used for family purposes and that, after separation, the wife had no desire to use the clubs for business or for pleasure.
[38] In the present case, there is simply not the specificity about either the nature and costs allocation of the original and continuing membership (Dr. Adams’ nominally) or Mrs. Adams’ new post-separation dining and swimming membership to ground an analysis of the concepts of ‘property’ and ‘value’ in an equalization context. In these circumstances, if the parties cannot resolve this matter it will be necessary for them to provide the trial judge with better evidence, including documentary evidence, about the nature, privileges and costs of the golf club membership.
(4) Post-separation mortgage payments
[39] The Adams’ matrimonial home was a large and expensive one. Dr. Adams was the legal owner of the home and he was responsible for paying the mortgage. Prior to the separation in October 1996, Dr. Adams made mortgage payments of $1,500 weekly or $78,000 yearly. These high weekly mortgage payments accomplished the goal of, as expressed by Dr. Adams, “paying it off in a very rapid rate”.
[40] After the separation, Dr. Adams made no change in the mortgage payments until September 1997, when he extended the mortgage to 20 years and reduced his payments to $1,436.15 monthly. These payments continued until the home was sold in September 1998, with Dr. Adams making them until May 1998, and then Mrs. Adams making them pursuant to a separation agreement.
[41] In October 1996, the date of separation, the outstanding mortgage was $260,421. In September 1998, the date of the sale, the mortgage was about $180,757. Dr. Adams’ position at the trial was that he should receive the benefit of the almost $80,000 post-separation paydown on the mortgage because he was solely responsible for it.
[42] The trial judge rejected Dr. Adams’ submissions on this issue. He reasoned:
[Dr. Adams] argued that Mrs. Adams should not receive a capital improvement because the doctor after separation wished to reduce the mortgage. Now the difficulty I have with the argument made on behalf of Dr. Adams is that he voluntarily made these prepayments at a time when the parties agreed that they were equal owners. Dr. Adams voluntarily made prepayments on the mortgage and thereby voluntarily accrued a benefit to his wife. It is my opinion that the figure that should be used for the mortgage indebtedness is $180,757 which was the amount owing on the mortgage as of the date of the sale.
[43] In my view, the trial judge’s decision on this issue was supported by the record. I reach this conclusion for several reasons.
[44] First, before the trial, the parties agreed that notwithstanding that title to the matrimonial home was registered in only Dr. Adams’ name, Mrs. Adams would be considered a co-owner pursuant to the doctrine of constructive trust. Accordingly, before separation in October 1996, the mortgage payments were for the benefit of both spouses, and indeed the family, not just Dr. Adams.
[45] Second, the mortgage payment situation did not change for almost a year after the parties separated. If the substantial mortgage paydowns before the marriage were for the benefit of both ‘co-owners’, and there was no change in these payments for almost a year, the logical inference is that Dr. Adams did not intend to change the situation.
[46] Third, when the home sold in September 1998, the proceeds were divided equally between Dr. and Mrs. Adams. Dr. Adams did not suggest at that juncture that Mrs. Adams should receive less than him because of the post-separation mortgage payments he had made.
[47] Fourth, although Dr. Adams testified his understanding was “without talking to anybody, that continuing to put money on the principal at that stage would be an asset that would be accrued more toward myself”, he also testified that he viewed the payments as support for his family following his separation from his wife and departure from the matrimonial home. Indeed, Dr. Adams concluded his testimony at the trial on this issue by saying that he agreed with Mrs. Adams’ counsel “that the primary reason was to provide a roof over the heads of my family”.
[48] In summary, the parties’ agreement that the matrimonial home was co-owned through the doctrine of constructive trust, the existence of large mortgage paydown payments before separation, the fact that these payments continued for almost a year after separation, the equal distribution of the proceeds of the sale of the matrimonial home, and Dr. Adams own testimony all support the trial judge’s conclusion that “Dr. Adams voluntarily made prepayments on the mortgage and thereby voluntarily accrued a benefit to his wife”. Accordingly, the trial judge was correct to select the mortgage indebtedness at the date of the sale of the matrimonial home ($180,757) as the proper figure for equalization purposes.
E. DISPOSITION
[49] I would dismiss the appeal on the child support, spousal support and post-separation mortgage payments issues. I would allow the appeal on the golf club membership issue.
[50] The respondent has been substantially successful on the appeal. I would award costs of the appeal to the respondent.
RELEASED: April 30, 2001
“J. C. MacPherson J.A.”
“I agree J. W. Morden J.A.”
“I agree M. J. Moldaver J.A.”
[1] The trial judge also ordered Dr. Adams to maintain sufficient disability and life insurance to fund his child and spousal support obligations. Dr. Adams appealed this component of the judgment. However, he abandoned his appeal on this issue at the appeal hearing.