COURT OF APPEAL FOR ONTARIO
MacPherson, Cronk and Gillese JJ.A.
BETWEEN
Catherine Heard
Applicant
(Appellant in appeal)
and
Garry Heard
Respondent
(Respondent in appeal)
James D. Singer, for the appellant
T.G. Reczulski, for the respondent
Heard: February 28, 2014
On appeal and cross-appeal from the order of Justice Peter Z. Magda of the Superior Court of Justice, dated February 7, 2013.
1The parties were married on September 18, 1982, and separated on November 1, 2009. There are two children of the marriage: Kaitlyn Heard, born on March 4, 1996, and Natalie Heard, born on March 17, 1998. The children reside primarily with the wife, Catherine Heard.
2In the fall of 2011, both parties brought motions in the Superior Court to resolve child and spousal support issues, as well as payment of the children’s extraordinary expenses under s. 7 of the Federal Child Support Guidelines, S.O.R./97-175. The motions judge ordered the trial of an issue regarding all disputed financial issues. On October 5, 2011, the parties agreed on five issues for trial: (1) imputation of income to the husband; (2) child support and apportionment of s. 7 expenses; (3) spousal support payable by the wife; (4) property issues, including the sale of the matrimonial home and equalization; and (5) financial adjustments between the parties.
3The wife appeals from the trial judge’s ruling regarding equalization of net family property and his order that each party bear their own costs of the trial. The husband cross-appeals from the trial judge’s imputation of income to him for the purpose of support and s. 7 expense obligations, and from the trial judge’s dismissal of his spousal support claim against the wife.
A. Appeal
(1) Alleged Equalization Errors
(a) The Limited Partnership Issue
4The wife argues that the trial judge erred in his ruling on equalization of net family property by attributing the total post-separation losses sustained in a limited partnership investment in First Leaside Securities (the “LP Investment”) to her.
5The wife contends that the LP Investment was treated by the parties as a joint asset throughout their marriage and after separation. In the alternative, she submits that she held the LP Investment in trust, before and after separation, for the joint benefit of the parties.1 On either basis, she contends that she alone should not bear the post-separation losses in the LP Investment (approximately $164,071 (U.S.)), as the trial judge held, but rather, such losses should be shared equally by the parties. Citing this court’s decision in Serra v. Serra, 2009 ONCA 105, 93 O.R. (3d) 161, the wife maintains that the trial judge’s treatment of these losses produced an unconscionable equalization of net family property.
6We reject these arguments.
7In our view, in the face of the trial judge’s factual findings, the wife’s attack on the trial judge’s treatment of post-separation losses in the LP Investment is unsustainable.
8The trial judge considered, in detail, the wife’s claim that the parties treated the LP Investment as a joint asset throughout their cohabitation and following separation. He also addressed the wife’s contention that the LP Investment was impressed with a trust in favour of both parties. In rejecting these claims, the trial judge made the following key findings:
at all material times, the wife was the sole registered owner of the LP Investment;
the wife was not constrained by the husband from dealing with the LP Investment, either before or after separation. The wife controlled the LP Investment and was free to deal with it as she saw fit, without interference by the husband;
the wife benefited from her ownership of the LP Investment by receiving various income tax refunds in respect of claimed losses in the LP Investment both before and after separation;
the wife acknowledged that she intended to utilize the full value of the LP Investment, post-separation, to finance her acquisition of the husband’s interest in the former matrimonial home; and
when the parties were unable to agree on the husband’s support obligations following separation, the wife unilaterally elected to refrain from selling or otherwise dealing with the LP Investment until the support dispute was resolved.
9These critical findings were open to the trial judge on this evidentiary record. They are dispositive of the wife’s claims that the LP Investment was a joint asset of the parties or that it was impressed with a trust in favour of both parties. They establish that the wife had legal title to the LP Investment and that she controlled and used it for her own benefit after separation. These facts are inconsistent with the characterization of the LP Investment as a joint or trust asset.
10The parties spent some time in their submissions on appeal addressing the significance of the wife’s failure to expressly plead her trust claims concerning the LP Investment. In our view, at this stage, this factor is irrelevant. The trial judge allowed the wife to lead evidence in support of her trust claims and the parties had full opportunity to argue the trust issues at trial. In these circumstances, no procedural unfairness arose from the pleadings issue. Further, the trial judge considered the evidence and the parties’ submissions on the trust issues and concluded, on the merits, that the evidence failed to establish the trust arrangements alleged by the wife. This was his call to make.
11It is true, as the wife emphasizes, that the parties shared equally in the monthly funds generated by the LP Investment during their marriage and that the husband continued to receive one-half of these monthly funds after separation.
12However, this aspect of the parties’ conduct concerning the LP Investment is not determinative of its essential nature. As the trial judge held, the wife’s legal ownership of the LP Investment entitled her to deal with it as she saw fit. The evidence at trial, accepted by the trial judge, established that she in fact did so by deriving income tax benefits associated with losses in the LP Investment both before and after separation, and by unilaterally determining, post-separation, when and if the LP Investment would be sold. Moreover, on her own admission, the wife intended to derive exclusive benefit from the LP Investment post-separation, by using it to facilitate her purchase of the husband’s interest in the former matrimonial home.
13Simply put, the wife’s own conduct in relation to the LP Investment belies her efforts to now characterize the LP Investment as a joint or trust asset.
14Nor does the wife’s invocation of Serra assist her. As the trial judge pointed out, at para. 75(b) of his reasons:
In Serra, the husband was bound by an order prohibiting him from disposing of the business asset. In the case before me, the applicant was never subject to any order restraining her from disposing of the FL Partnership investment. As late as August of 2011, the applicant could have sold the investment and received full market value. From the evidence, it was she who, in January 2010, refused to have any further dealings with property until support was settled to her satisfaction. I agree that the applicant chose to retain this asset and must suffer the consequences of so doing.
We agree.
15This ground of appeal fails.
(b) The Notional Tax Rates Issue
16The wife also submits that the trial judge erred in his equalization of net family property analysis by applying a notional tax rate of 20.7% to the taxable assets of both parties (principally, to the husband’s registered retirement savings plan and the wife’s pension).
17We do not accept this submission.
18At trial, the wife relied on tax tables prepared by a pension valuator – DSW Actuarial – to argue that divergent tax rates (28.4% for the wife and 18% for the husband) should be applied to determine the net value of their respective taxable assets.
19The trial judge disagreed. He held, among other matters, that there was no admissible evidence before him establishing that divergent notional tax rates should apply. We see no error in his ruling on this issue.
20The wife led no expert evidence regarding the issue of applicable notional tax rates, or the parties’ respective projected incomes on retirement. And, as the trial judge observed, the wife herself was not qualified to offer evidence on income-tax related projections or tax rates.
21Even if it was open to the wife to rely on the income tax rates included in the DSW Actuarial report, the wife herself applied a notional tax rate of 20.7% to the parties’ respective registered retirement savings plans in various of her financial statements.
22It was open to the trial judge to determine, as he did, whether the whole of the evidence satisfied him of the appropriateness of the notional tax rates urged by the wife. He concluded that it did not. In the circumstances described above, the trial judge cannot be faulted for declining to apply divergent tax rates to the parties’ taxable assets.
(2) Trial Judge’s Costs Award
23The wife argues that in ordering each party to bear their own costs of the trial, the trial judge erred by failing to take into account the offers to settle exchanged by the parties prior to trial. Her main contention is that the results she achieved at trial were better than the resolutions she proposed on key issues in her offer to settle. As a result, she says, she was entitled to her costs of the trial.
24The trial judge dealt with the issue of costs at para. 104 of his reasons:
Success in this case was divided and I am not inclined to consider making an award for costs either way. The parties both sustained considerable financial loss with the post-separation collapse of First Leaside. Adding now a further financial burden would not be fair to either party. Consequently, the court uses its discretion and orders that each party shall bear their own costs. [Citations omitted.]
25The reasons do not expressly indicate whether the trial judge considered the parties’ offers to settle when assessing costs. To the extent that the trial judge failed to take account of these offers to settle, we agree that he erred.
26That said, on the results achieved at trial and in light of our disposition of the other issues on appeal, set out above, success at trial was divided. The results achieved by the wife at trial on spousal and child support issues were more favourable to her than had been proposed by her in her offer to settle. However, the wife was unsuccessful at trial in respect of the contested equalization payment issues, and the results achieved by the husband on these issues were materially better than had been proposed in the wife’s offer to settle. In addition, we have already concluded that the wife’s challenge to the trial judge’s equalization payment ruling must be dismissed.
27In these circumstances, the trial judge did not err in principle in his costs award. Nor, in our view, is his costs award plainly wrong. Accordingly, there is no basis for appellate interference with his discretionary costs award.
28For these reasons, the appeal is dismissed.
B. The Cross-Appeal
(1) The Imputation of Income and Section 7 Expense Issues
29The husband contends on his cross-appeal that the trial judge erred by imputing the following income to him: 2010 - $60,000; 2011 - $70,000; and 2012 - $80,000. He does not take issue with the imputation of income of $50,000 for 2009.
30At trial, the wife advanced several methodologies for imputing income to the husband. The trial judge rejected them all, but still imputed income. He reasoned, at para. 32:
Although I find the applicant’s methodology flawed, in that each approach, on its own, was insufficient to impute income to the respondent – it is the cumulative effect of all of her approaches that provides a sufficient evidentiary base for me to consider the imputation of income, in a greater amount than the respondent admits to in his testimony and his financial statements.
31We agree with the husband that this is not a proper basis for imputing income. A series of rejected methodologies cannot, by rolling them together, become a valid methodology. Four ‘no’s’ (by our count) do not make a ‘yes’.
32However, there are other factors, discussed and relied on by the trial judge, that support his decision to impute income to the husband in the amounts he chose.
33An important factor is the trial judge’s rejection of the husband’s credibility on the income issue. He said, at paras. 33 and 34 of his reasons:
The respondent admitted at trial, as he has throughout the proceedings, that he has filed false income tax returns with the Canada Revenue Agency. He admitted that he collected employment insurance for about one year when he had income which he did not disclose, which would have disentitled him, and that he did not remit GST on a number of inspection payments made to him.
I find that the respondent’s actions are deceitful, fraudulent, and unlawful. His unlawful conduct does negatively impinge on his credibility and if he is prepared to hide income from the authorities, he may well be hiding income from the court… .
34A second factor that supports the trial judge’s conclusion on this issue is the reliance he placed on the husband’s lifestyle. We cite but one example, at para. 49 of the trial judge’s reasons:
Since separation, he has taken some exotic vacations including a trip to Fiji and Australia. He drives a BMW X5 which he paid for in cash and leases a Porsche Boxter for $575.00 per month.
35In our view, these factors – credibility and lifestyle – taken together amply support the trial judge’s decision to impute income to the husband, and in the amounts he chose.
36Based on the income imputed to the husband, we also see no error in the trial judge’s ruling that the husband shall pay 40% of the children’s s. 7 extraordinary expenses on a going forward basis.
(2) The Spousal Support Issue
37The husband argues that the trial judge erred by not awarding him spousal support.
38The trial judge stated his conclusion on this issue in this fashion, at para. 50 of his reasons:
I find that the respondent has not suffered any economic disadvantage arising from the marriage or its breakdown. If there is any disadvantage in this regard, it would be to the applicant who now only has her own income and a modest amount of child support to look after herself and two teenage daughters who live with her. The respondent has not suffered any economic hardship arising from the breakdown of the marriage. The respondent is self-sufficient and in my view is doing quite well in the home inspection business.
39A trial judge’s decisions as to whether to award spousal support, and as to the quantum of spousal support, are discretionary decisions. An appellate court should not interfere with these determinations absent an error in principle, a significant misapprehension of the evidence, or unless the order is clearly wrong: see Hickey v. Hickey, 1999 CanLII 691 (SCC), [1999] 2 S.C.R. 518, at para. 11.
40In our view, the husband cannot bring the trial judge’s decision on spousal support within any of these categories. There is no basis for appellate intervention.
41Accordingly, the cross-appeal is dismissed.
C. Costs of the Appeal and Cross-Appeal
42Success on the appeal and cross-appeal is divided. In these circumstances, we make no award of the costs of these proceedings.
Released: “MAR 17 2014” “J.C. MacPherson J.A.”
“EAC” “E.A. Cronk J.A.”
“E.E. Gillese J.A.”
