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* 5 Feb 2009-OC Downturn reduces spousal payment -Original
ruling ‘unconscionable’ in light The Ontario Court of Appeal has reduced the equalization payment the owner of a textile company must pay to his ex-wife by more than $2 million because of a significant downturn in the industry. It is the first time the Ontario court has ruled on whether a “market-driven” reduction in the value of a spouse’s assets after the date of separation should be considered in determining an equalization payment. The decision released yesterday overturned a lowercourt ruling that ordered Harold Serra to pay $3.3 million to Barbara Serra, in addition to $12,500 per month of spousal support. Instead, Harold Serra must pay $900,000 in equalization and between $7,500 and $10,000 per month support for two years, depending on when a dispute over a condominium in Florida is resolved. The couple separated in 2000 after 24 years of marriage. Harold Serra operated Ajax Textiles, which enabled the couple to enjoy a “luxurious lifestyle” with expensive cars, a limousine driver and lavish vacations, the court noted. It was the third marriage for Harold Serra, the second for his now ex-wife. He has since remarried and has a young child. Harold Serra had a net worth of between $9.5 and $11.3 million when the couple separated. Soon after, increased trade liberalization and competition from countries such as China had a devastating effect on the Canadian textile industry. By the time of their trial in Ontario Superior Court in 2006, the net worth of Mr. Serra had dropped to between $1.9 and $2.6 million. The Family Law Act in Ontario requires equalization payments to be determined based on the value of assets at the time of separation. Barbara Serra was seeking a payment that was more than the net worth of her exhusband in 2006. The Court of Appeal concluded it would be “unconscionable” to order a payment based on the net worth of Harold Serra at the time of separation because the future downturn was beyond his control. “This is not a case where the owner of the diminishing asset could have sold it in a falling market in order to preserve at least some of its value,” wrote Justice Robert Blair on behalf of Justices Robert Armstrong and Michael Moldaver. Philip Epstein, who represented Harold Serra, said yesterday his client “would not have received any relief” if it were simply a case of a stock portfolio dropping in value after the couple separated. The Court of Appeal suggested its ruling is fact specific and may not necessarily be applied in future cases as a result of the current economic downturn. Depending on the length and severity of the recession, “at least
you have your foot in the door” to make the argument, said Mr. Epstein.
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