Arcuri-Gunasekaram v. Gunasekaram

This judgement of Justice Kitely, of the Ontario Superior Court of Justice, discusses the legal test undertaken to determine whether to award an advance on an equalization payment.  In doing so, Justice Kitely reviews the legal test outlined in Zagdanski v Zagdanski (2001) in order to determine whether the Applicant Mother is entitled to an advance.

At the outset, Justice Kitely discussed the preliminary issue regarding which issues would be dealt with on November 28, 2013 (the date the matter was heard) and which would be postponed until a later date. Both parties had brought motions returnable November 28, 2013 for multiple orders. The Applicant sought the following orders:

• an order striking the Respondent’s pleadings if he failed to pay arrears of child and spousal support in the amount of $125,000;
• an order requiring the Respondent to pay $400,000 as an advance on the equalization payment;
• in addition to or in the alternative to those two claims, an order vesting the Respondent’s interest in the matrimonial home and bank accounts etc. in the name of the Applicant with the net value of the assets to be credited against the support arrears and or the equalization payment;
•  if the Respondent’s interest in the matrimonial home is transferred to the Applicant, then an order confirming that the property is no longer a matrimonial home;
•  an order requiring the Respondent to provide information attached in Schedule A;
• if he failed to provide the information in Schedule A, then an order requiring him to pay the Applicant $500 per day until all of the information has been provided;
• an order requiring the Respondent to provide proof that he is maintaining the children and the Applicant as beneficiaries of medical and dental insurance as required by the order made August 26, 2011;
• and costs.

The Respondent Father, on the other hand, sought to address access issues; vary an Order dated August 26, 2011 requiring him to pay spousal and child support in the sum of $14,000.00 per month on the basis that his income was currently $97,545; and finally, the Respondent sought an order for the immediate partition and sale of the matrimonial home.

Following submissions from both counsel, Justice Kitely made a preliminary ruling adjourning much of the Applicant’s motion including her request to strike pleadings, as well as the Respondent’s motion for access and to sell the matrimonial home. Ultimately, the court decided that it would only hear submissions on the Applicant’s motion for an advance of the equalization payment and a vesting order.

Justice Kitely then reviewed the Affidavits of both parties.  According to the Applicant’s Affidavit, which was described as incorporating assumptions favourable to the Respondent, the Respondent owes an equalization payment of $717,025. The Applicant further claimed that even if the court allowed for the adjustments sought by the Respondent that the Respondent would still owe $663,500. For his part, the Respondent agreed with the Applicant’s assessment of the equity in the home, and sought credits amounting to $180,000.

After reviewing the parties’ respective Affidavits, Justice Kitely examined the applicable legislation and case law, referring to Zagdanski v Zagdanski; Fireston v Pfaff; and Rodaro v Royal Bank (on the issue of the vesting order).

As noted by Justice Kitely, s. 4(1), 7(1) and 9 of the Family Law Act (FLA) give the court inherent jurisdiction to award an advance on the equalization payment.  In Zagdanski, Justice Lane enunciated four factors to be considered when determining whether an advance on equalization should be permitted; namely:

1. whether there will be little or no realistic chance that the amount of the contemplated advance will exceed the ultimate equalization amount;
2. whether there will, therefore, be some considerable degree of certainty about the right to, and likely minimum amount of, an equalization payment;
3. whether there will be need, not necessarily in the sense of poverty, but a reasonable requirement for funds in advance of the final resolution of the equalization issue, including funds to enable the continued prosecution or defence of the action; and
4. whether there may be other circumstances such that fairness requires some relief for the applicant; frequently, but not necessarily, there will have been delay in the action, deliberate or otherwise, prejudicing the applicant by, for example, running up the cost.

Applying the aforementioned test to the facts as enunciated in the parties’ Affidavits, Justice Kitely concluded:

I am satisfied on the record as it stands (including the Answer) that there will be little or no realistic chance that the amount of the contemplated advance will exceed the ultimate equalization amount and there is some considerable degree of certainty about the right to and likely minimum amount of, an equalization payment. To the extent that the Respondent claims credits, they can be accommodated because the application of his equity in the home to the equalization payment still leaves a balance owing. The Applicant has a reasonable requirement for funds in advance of the final resolution of the equalization issue, including funds to provide for herself and the children and funds to enable her to continue to prosecute the action.

Pursuant to Firestone v Pfaff, which stands for the proposition that the fourth Zagdanski factor is the consideration of fairness to the Applicant and the Respondent, Justice Kitely reviewed the fairness to the parties of making an Order for an advance on the equalization.

With respect to the Applicant, Justice Kitely concluded that “the strong evidence that the Respondent has altered credit card statements to conceal the true extent of his income is a compelling factor in favour of the Applicant and against the Respondent. In addition, the fact that the Respondent is clear that bankruptcy is a realistic possibility means that it is understandable that the Applicant wants to realize on her claim as soon as possible.”

With respect to fairness to the Respondent, Justice Kitely determined that the only relevant factor submitted by the Respondent’s counsel was the fact that the Respondent had not had an opportunity to bring his motion for the sale of the matrimonial home, and a decision to grant the Applicant’s Order would, in effect, make the Respondent’s motion for an Order for partition and sale moot.

Finally, the court raised a residual concern of Mr. Edney, counsel for the Respondent, who had indicated that if the Order requested by the Applicant were made and the court directed that title to the matrimonial home be transferred to the Applicant, that this would result in an unlawful preference over the Respondent’s other creditors. Noting her hesitance with respect to this issue, Justice Kitely ultimately dismissed the Applicant’s motion with leave to bring it back after or simultaneously with the motion by the Respondent for sale of the matrimonial home in order to provide a Factum that dealt with issue of a preference being made in favour of the wife over other creditors.

Justice Kitely would have this concern as an equalization payment does not take priority over any other creditors.