Z.J.S. v. S.D.S.

IN THE SUPREME COURT OF BRITISH COLUMBIA IN THE SUPREME COURT OF BRITISH COLUMBIA Citation: Z.J.S. v. S.D.S., 2004 BCSC 935 Date: 20040713 Docket: ED034138 Registry: Nanaimo Between: Z.J.S. Plaintiff And S.D.S. Defendant Before: The Honourable Madam Justice Brown Reasons for Judgment The plaintiff Z.J.S. On his own behalf Counsel for the defendant L.K. Taylor Date and Place of Trial: January 13, May 10, 11, 12, and 13, 2004 Nanaimo, B.C. [1] These are matrimonial proceedings. There are two issues which arise in this action: 1. What, if any, agreement was reached between the parties on December 28, 1992? 2. How is the matrimonial home to be divided? [2] In my view, there was an agreement reached December 28, 1992 between the parties that Mrs. S.D.S. would receive the matrimonial home in return for relinquishing all other claims, including spousal support claims and claims against other family assets. [3] In my view, this agreement was not unfair to Mr. Z.J.S. and it is appropriate that the matrimonial home be transferred to Mrs. S.D.S.. BACKGROUND [4] Mr. and Mrs. S.D.S. were both born in Poland. He is now 65 years of age and she is 69. [5] They were married in 1957. They have one child, M., born in 1959. [6] After their marriage, Mr. Z.J.S. qualified as an Engineer on ocean going vessels. He worked away from home for several months of each year. He says that in 22 years he was at home only 24 months. While this may be somewhat of an exaggeration, the parties agree that Mr. Z.J.S. was away from home many months of each year. [7] Mrs. S.D.S. completed her education after marriage. She finished high school at night school and then completed a degree in economics through distance learning. She was employed until 1983 as an office manager. Her earnings were significantly less than his. Their earnings were deposited to joint accounts in Poland and she was responsible for managing their affairs, paying expenses, raising their son and looking after their apartment. [8] In 1982 Mr. Z.J.S. defected to Canada. Mrs. S.D.S. remained in Poland until 1985, when she immigrated to Canada. In 1986 their son was also allowed to immigrate. [9] In 1989, Mr. Z.J.S. built a house for the family on Q.[ ] Drive in Nanaimo. The family lived in the house until December 28, 1992, when Mr. Z.J.S. moved out. [10] On the day he moved out, Mr. Z.J.S. signed a document which provides: I testify that I give up my legal rights to a Lot No. [ ] and a house at Q.[ ] Drive in Nanaimo in favor of my former wife S.D.S., and I put myself into an obligation of paying off secured on the house mortgages at Royal Bank and Scotia Bank. In exchange, S.D.S. has no claims against me. Z.J.S. [11] Lot [ ] is a reference to the legal description of the real property. [12] After moving out of the residence in December 1992, Mr. Z.J.S. fished on his fishing boat, the M.[ ], until it sank in 1994. He then worked at various jobs, eventually returning to work as a chief engineer on ocean going vessels. In cross-examination he acknowledged earning as much as $100,000 per year from fishing and said that he earned sometimes $4,400 per month U.S. as a chief engineer. [13] Mrs. S.D.S. applied in this action for production of documents regarding his income after 1992. Her application was opposed and was refused. Mr. Z.J.S. has not produced this documentation at trial. Mr. Z.J.S. is vague as to the dates he worked, where he was employed, and the amounts that he earned. [14] He described himself as a money making machine and said that his services were in demand, that he could have worked as much as he chose. He said that he was making 'good money' as a chief engineer. [15] After separation, Mrs. S.D.S. continued to live in the home, and received social assistance. There is a dispute between the parties as to how much support Mr. Z.J.S. provided to Mrs. S.D.S.. She says that he provided her with no regular support; he gave her $50 or $100 on occasion for birthday or name day presents; he once paid the house insurance, once the property taxes and once vehicle insurance when she was short of funds. She says that she paid the mortgage from her social assistance and got by with social assistance and some assistance from her son. [16] Mr. Z.J.S. says that he paid her significant amounts of money, at her request giving money to her son for her benefit. [17] He has provided copies of cheques to Mrs. S.D.S. for the period 1990/1991 for more than $43,000. He has also produced copies of cheques payable to Mr. S.Jr. for more than $28,000 in the period 1991 to 1995. Of these, $25,000 of the cheques were paid to Mr. S.Jr. in 1994, the year that he got married. [18] In 1998 - 2000 Mr. Z.J.S. deposited more than $27,000 to a joint account in the names of himself and Mr. S.Jr.. DISCUSSION I. Does the document dated December 28, 1992 set out the agreement between Mr. and Mrs. S.D.S.? [19] Mrs. S.D.S. says that in 1992 she became clinically depressed and realized that she could no longer continue to live with Mr. Z.J.S.. She says that in December 1992 she told him that she did not want to live with him any longer, she wanted him to leave and she wanted to live in the house. She said that Mr. Z.J.S. provided her with the document dated December 28, 1992, giving her the house. In exchange, she gave up any claim to his earnings, which she expected to be substantial as he was in good health and had a good history of earnings, and she gave up claims to the fishing vessel M.[ ]. She then applied for social assistance and has been receiving social assistance ever since. She uses the money from social services to pay for the mortgage and her living expenses. She is assisted with some of those expenses by her son. She considered the agreement to be a binding agreement. [20] Mr. Z.J.S. says that he wanted to continue to live in the house with his wife. He says that she told him that unless he signed the document she would not live with him as man and wife. He says that she dictated the contents of the document and he signed it, expecting that they would then live as husband and wife. He says that to his shock, she forced him to pack his personal belongings and leave the house the same day. He says that he waited five years for her to live up to her side of the bargain, but she refused to let him move back into the house. In 2000, after he had suffered a heart attack and was no longer able to work, he started this action. [21] I find that the document dated December 28, 1992 accurately sets out the agreement the parties reached: Mr. Z.J.S. gave up his rights to the house in favour of his wife and she relinquished all other claims against him for support and any other family assets. The parties' behaviour after December 28, 1992 is consistent with this. On December 28, 1992 Mr. Z.J.S. moved out of the residence and did not return. Mrs. S.D.S. applied for and received social assistance. She made no claims against her husband for spousal support or for any portion of the fishing boat M.[ ]. [22] Mr. Z.J.S.'s version of events is not consistent with the document and is not consistent with the parties' behaviour. If the arrangement were as he suggests, there would be no need for him to refer to Mrs. S.D.S. as his "former wife", nor would he have written "in exchange, S.D.S. has no claims against me." If he were transferring the house to his wife on her demand, to make peace in the household as he suggests, so that they could continue to live as husband and wife, one would have expected him to do just that, transfer title to the house on condition that he would be able to live there. Further, if Mrs. S.D.S. had reneged on her side of the bargain, as he suggests she did, one would expect him to take steps to recover his half of the house long before he suffered a heart attack and was no longer able to work. [23] With respect to the payments that Mr. Z.J.S. says he provided to Mrs. S.D.S. to cover the mortgage: 1. Even if these payments were made, they would be consistent with his agreement to make the mortgage payments set out in the document of December 28, 1992; 2. There is no consistent payment. There is no monthly amount paid. In some years, 1993 for example, there is no documentary evidence of payment made to Mrs. S.D.S. or her son. Payments that are made in the period 1993 - 2000 are made inconsistently. 3. Mr. S.Jr. and Mrs. S.D.S. both testified that payments made by cheque and by wire transfer were made to Mr. S.Jr. for his own benefit because he was experiencing financial difficulties, had trouble finding consistent employment and was having difficulties making ends meet. With respect to 1994, Mr. S.Jr. testified that a number of the payments in 1994 were gifts to him for himself or himself and his wife, as that was the year in which he got married. Mr. S.Jr. testified that at times in the period 1994 - 2000 he acted as translator or interpreter for his father. On another occasion, he was asked by his father to find a particular type of diving equipment, purchase it and take it to Poland for his father. Mr. S.Jr. says that his father paid him for performing these services. [24] Finally, Mr. S.Jr. and Mrs. S.D.S. were consistent in their evidence and provided documents to support their evidence. By contrast, Mr. Z.J.S.'s evidence was inconsistent and his document production "spotty". For example, when swearing his financial statement in this action in December 2002 Mr. Z.J.S. swore that he had lived in poverty for the last three years and attached in support his Canadian tax returns. He did not disclose his significant income as a chief engineer in 1999 and part of 2000. When this was put to him in cross-examination, his explanation was that he didn't realize that he should have disclosed that source of income. By contrast, he was anxious to ensure that Mrs. S.D.S..'s Polish pension was disclosed to the court, to the extent that he wrote to the Polish authorities, purporting to be Mrs. S.D.S., in order to obtain a certificate from the Polish authorities as to the pension that she was receiving. Mr. Z.J.S. has been at pains lead the court to believe that he is destitute and that he has been deprived of his half interest in the matrimonial home by the fraud of his wife and son. When it suits his purposes, he produces detailed documentation, for example, the history of his earnings in Poland from 1962 - 1982 and the wire transfers to the joint account that he shared with his son from 1997 - 2000. By contrast, he has produced incomplete documentation of his earnings after 1992. [25] In conclusion, I accept the evidence of Mrs. S.D.S. and Mr. S.Jr. as to the agreement of December 28, 1992 and as to payments made by Mr. Z.J.S. to Mrs. S.D.S. and to Mr. S.Jr. after 1992. II. Proper Division of Assets [26] Mr. Z.J.S. has not asked in his pleadings to have the agreement of December 1992 set aside. However, I did ask the parties to address in argument whether the agreement operates fairly and whether s. 68 of the Family Relations Act, R.S.B.C. 1996 c. 128, applies. [27] Mr. Z.J.S. maintains that it is not fair that he does not have access to one-half of the value of the house. In his view, he has worked hard all of his life, built the house with his own labour and should now receive one-half of its value. He says that they had accumulated significant family assets in Poland. He says his wife and son gave the assets to the church when they left Poland, without consulting him. He says Mrs. S.D.S. wasted these assets and should not be allowed to keep the house. [28] Mrs. S.D.S. maintains that the agreement of December 1992 was not unfair to Mr. Z.J.S.. She has not insisted on full compliance with its terms: Mr. Z.J.S. has not paid the mortgage and she does not wish him to do so now. The agreement, in her view, is more than fair to Mr. Z.J.S. and, in fact, she has received far less than has he. [29] The Supreme Court of Canada has recently considered the approach to be taken by courts when reviewing agreements made by the parties. Two recent decisions have been issued: Miglin v. Miglin, [2003] 1 S.C.R. 303; Hartshorne v. Hartshorne (2004), 236 D.L.R. (4th) 193. [30] The agreement here is not a marriage agreement under s. 61 of the Family Relations Act because it was not signed by both spouses and was not witnessed. However, the agreement is a separation agreement as discussed by the Court of Appeal in Rutherford v. Rutherford (1981) 23 R.F.L. (2d) 337 at 346: it is an arrangement between husband and wife to live separate and apart which sets out the financial support that one is to provide to the other and the division of matrimonial property. On December 28, 1992 the parties agreed to separate. The written agreement sets out the division of property and provides that Mrs. S.D.S. has no other claims against Mr. Z.J.S.. [31] Our courts have applied s. 68 of the Family Relations Act to inquire into separation agreements and to reapportion the property divided in those agreements. In doing so, the courts have applied the factors in s. 65 of the Family Relations Act, in determining whether the separation agreement is unfair. [32] To my mind, the comments made by the Supreme Court of Canada in Hartshorne as to the approach to be taken by a court when asked to set aside or vary a marriage agreement apply when the court is asked to vary or set aside a separation agreement. [33] Here, as in Hartshorne, I am satisfied that there was no duress, coercion or undue influence to cause Mr. Z.J.S. to enter the separation agreement of December 1992. [34] In Hartshorne at 201 and 210 - 211, the Supreme Court of Canada said: ...courts must encourage parties to enter into marriage agreements that are fair... Courts should be reluctant to second guess the arrangement on which [the parties] reasonably expected to rely... It is important to note at this point that while both the parties and the courts speak of the contract being fair or unfair, it is really the apportionment under the contract that is under scrutiny. One must instead consider the fairness of the division of property... [35] In Hartshorne at 212, the Supreme Court of Canada quoted its judgment in Miglin, saying: In exercising their discretion, trial judges must balance Parliament's objective of equitable sharing of the consequences of marriage and its breakdown with the parties' freedom to arrange their affairs as they see fit. Accordingly, a court should be loathe to interfere with a pre-existing agreement unless it is convinced that the agreement does not comply substantially with the overall objectives of the Divorce Act. And said at 216: The ultimate point then is this: in determining whether a marriage agreement operates unfairly, a court must first apply the agreement. In particular, the court must assess and award those financial entitlements provided to each spouse under the agreement, and other entitlements from all other sources, including spousal and child support. The court must then, in consideration of those factors listed in s. 65(1) of the [Family Relations Act], make a determination as to whether the contract operates unfairly. At this second stage, consideration must be given to the parties' personal and financial circumstances, and in particular to the manner in which these circumstances evolved over time. Where the current circumstances were within the contemplation of the parties at the time the agreement was formed, and where their agreement and circumstances surrounding it reflect consideration and response to these circumstances, then the plaintiff's burden to establish unfairness is heavier. Thus, consideration of the factors listed in s. 65(1) of the [Family Relations Act], taken together, would have to reveal that the economic consequences of the marriage breakdown were not shared equitably in all of the circumstances. This approach, in my view, accords with the underlying principle of the [Family Relations Act], striking an appropriate balance between deference to the parties' intentions, on the one hand, and assurance of an equitable result, on the other. [36] Here, applying the agreement, in 1992 the parties had two significant assets: 1. The house, with an assessed value of $112,200; 2. The fishing vessel M.[ ], which Mr. Z.J.S. purchased in 1989 for $85,000 and added $15,000 of equipment, for a total of $100,000. [37] They had debts of: 1. Royal Bank - $43,167.69; 2. Bank of Nova Scotia - approximately $15,000; and 3. M.M. - $40,000 for purchase of the M.[ ]. [38] The agreement provided that Mrs. S.D.S. would receive the house, worth in her view, $112,200 or, in her husband's view, $140,000, as of December 1992. Mr. Z.J.S. would receive the M.[ ] with an approximate value of $100,000. Mr. Z.J.S. would be responsible for all of the debt, approximately $98,000. [39] Section 65(1) provides that where a division of property would be unfair, the court may order that the property may be divided into shares fixed by the court. Section 65(1) states that unfairness is to be determined having regard to the following factors: (a) the duration of the marriage; (b) the duration of period during which the spouses have lived separate and apart; (c) the date on which the property was acquired or disposed of; (d) the extent to which property was acquired by one spouse through inheritance or gift; (e) the needs of each spouse to become or remain economically independent and self sufficient; or (f) any other circumstance relating to the acquisition, preservation, maintenance, improvement or use of property or the capacity or the liabilities of a spouse. [40] At first blush, the agreement appears unfair to Mr. Z.J.S.. However, in 1992 Mr. Z.J.S. was 54 years old and had a history of substantial earnings. As Mrs. S.D.S. testified, he was in good health and she anticipated that he would continue to earn good money for several years to come. [41] By contrast, Mrs. S.D.S. was 57 years old and had not been employed since 1984. Although she had tried to learn English, she had not been very successful. She had been hospitalized twice in 1992 for clinical depression and required daily medication and assistance from her son to cope with her affairs. Mrs. S.D.S. would likely have received permanent spousal support in the range of $1,000 - $1,500 per month, given Mr. Z.J.S.'s earning abilities. The agreement allowed Mr. Z.J.S. to avoid this significant liability. [42] Thus, considering the duration of the marriage, the needs of each to become or remain economically independent and self sufficient and the capacity and liabilities of the spouses, which I consider to be the most significant s. 65 factors in this case, in my mind the contract does not operate unfairly. [43] With respect to the disposal of the assets in Poland, I accept the evidence of Mrs. S.D.S. and Mr. S.Jr. that they recovered as much as they could given the constraints they faced when leaving Poland. Accordingly, even though the disposition of these assets in 1985 and 1986 is not a factor to consider in s. 65, I see nothing improper in the actions of Mrs. S.D.S. and Mr. S.Jr.., and nothing unfair to Mr. Z.J.S.. [44] Nor, to my mind, does the agreement operate unfairly today. In the words of Miglin, the current circumstances do not represent a significant departure from the range of reasonable outcomes anticipated by the parties and is in substantial compliance with the objectives of the Divorce Act, R.S.C. 1985 c. 3 (2nd Supp.), and the Family Relations Act. [45] Mr. Z.J.S. says that at the end of his working life he has virtually no assets and says that he should receive half of the equity in the house. However, I cannot conclude that Mr. Z.J.S.'s current circumstances are a significant departure from the range of reasonable outcomes anticipated by the parties. He earned significant money between 1992 and 2000. The investments which he chose to make, for example, a fish cutter in Poland, have not been successful. He says that he incurred substantial medical expenses as a result of his heart problems in 2000, 2001 and 2002. He gave his son $27,500 between 1994 and 1995 and a further $27,000 between 1998 and 2000. None of these factors make the separation agreement unfair, either at its execution or now. Mr. Z.J.S. has had the benefit of eight years of substantial earnings, without the obligation of paying spousal support to Mrs. S.D.S.. Mrs. S.D.S. has assumed the responsibility of maintaining the house and paying the Royal Bank mortgage. That she now has an asset of some value does not make the agreement unfair. Indeed, the agreement of December 1992 may well have been less than a court would have been awarded to Mrs. S.D.S. at the time. Accordingly, even if there were an application to set aside or vary the agreement, I would not grant such an application. [46] In conclusion, the property at Q.[ ] Drive in Nanaimo will be transferred to Mrs. S.D.S. and she will be responsible for the mortgage on that property. She has abandoned her claim for spousal maintenance; it is dismissed. There is also the matter of some family jewellery: Mrs. S.D.S. has said she does not want the jewellery, so Mr. Z.J.S. will receive all of the family jewellery. [47] Mrs. S.D.S. has been successful in this action and is entitled to her costs. "B.J. Brown, J." The Honourable Madam Justice B.J. Brown