Trial Judge Erred in Discounting Husband’s Income Properties Worth $5 Million
In a divorce case called Jonas v. Pacitto, the Court of Appeal concluded that the trial judge tasked with quantifying the wife’s spousal support entitlement had made a reversible error: The judge failed to take into account the fact that the husband owned rental properties worth nearly $5 million, and failed to impute added income to him accordingly.
The husband and wife filed for divorce after 13 years of marriage. They had signed a Marriage Contract prior to getting married, agreeing that if their union was dissolved then: 1) neither party would be entitled to the property of the other; and 2) the wife would have no claim for spousal support. After the wedding the husband – who was 25 years older than the wife – sponsored her for permanent residency in Canada, since she was a refugee claimant from Hungary.
The validity of the Marriage Contract came under contention, and the circumstances under which it was signed became a credibility issue for the trial judge to determine.
The judge rejected the wife’s claims that, as an economically-dependent refugee claimant with very limited English, she was in a vulnerable state. The judge also disbelieved that she had the contract imposed on her without giving her a chance to obtain legal advice. To the contrary, she had signed it in a lawyer’s office, it was translated for her and properly witnessed, and was signed before the wedding (not after, as she claimed). She knew what she was signing, but opted not to get independent legal advice from her own lawyer.
After concluding that the wife understood what she was agreeing to, the judge declared the Marriage Contract to be valid and binding in terms of precluding the division of property.
However, the wife should indeed have received more spousal support, in light of her financial circumstances. At the time of the trial, she was earning only about $15,500 per year, which was below the poverty line. The husband was ordered to pay her a lump sum of $40,000, based on what he declared was his modest annual income of about $24,000 from various rental properties.
The wife appealed, complaining that the trial judge should have invalidated the entire Marriage Contract, rather than just part of it. She also appealed the amount of the $40,000 lump-sum award as being too low.
First, the Appeal Court ruled that the Marriage Contract had been duly signed and witnessed, and that the wife had not been in a vulnerable state at the time, as she claimed. It was not invalid on that ground.
Next, the Court of Appeal confirmed the trial judge’s ruling on the property rights clause, but agreed with the wife about support – she should indeed have received more. This was because the trial judge had improperly discounted almost $5 million in residential real estate that the husband owned, and had not attributed appropriate rental income to him from that source. The trial judge’s conclusion had been based on the flawed reasoning that while the husband’s real estate properties had admittedly grown in value significantly, this was not due to the wife’s contributions.
While noting that appeal courts normally give deference to support orders made by trial judges, the Court of Appeal held that the “unique circumstances of this case require intervention by this court.” The trial judge should have at least considered imputing added income to the husband, especially since it was a fairly long marriage in which the wife “worked hard on the home front”. The wife had no real employment prospects and very low income of her own. Meanwhile, the value of the husband’s rental properties had increased significantly, into the millions.
Although the Court allowed the wife’s appeal in this respect, it was not positioned to decide the matter afresh, since the financial evidence from the trial was now three years old. It sent the matter back to the trial level for a hearing on the income issue, while emphasizing that both parties should provide full and current financial disclosure. This was because at the earlier hearing, the trial judge had expressed dissatisfaction with the evidence provided by both parties around income, owing in part to the husband’s failure to make proper disclosure of all his income sources and assets, and the wife’s failure to demonstrate what income should be imputed to him.
For the full text of the decision, see:
Jonas v. Pacitto, 2020 ONCA 727