Berta v. Berta
Ontario Reports
Court of Appeal for Ontario
MacPherson, Juriansz and L.B. Roberts JJ.A.
November 16, 2017
138 O.R. (3d) 81 | 2017 ONCA 874
Case Summary
Family law — Practice — Costs — Trial judge awarding husband full indemnity costs after finding that wife had behaved unreasonably throughout trial — Court of Appeal affirming equalization payment made by trial judge but returning case to trial judge to reconsider spousal support and costs — Court of Appeal finding that trial judge had erred in concluding that husband was entitled to full indemnity costs — Trial judge on reconsideration finding that wife had acted in bad faith at original trial and that husband should recover substantial portion of his costs — Trial judge reducing original costs award by 30 per cent — Wife's appeal from costs award dismissed.
Family law — Support — Spousal support — Trial judge imputing income to wife based on reasonable income from proceeds of her sale of shares to husband — Trial judge erring by failing to take account of tax implications of wife's receipt of $2.2 million for sale of shares and by double counting certain items in both "imputed income" and "other sources of income" categories — Trial judge not erring in ordering support at low end of Spousal Support Advisory Guidelines — Appropriate spousal support based on wife's corrected annual income of $203,874 and husband's annual income of $644,172 being $13,759 per month.
Facts
When their 27-year marriage ended in 2010, the husband purchased the wife's shares of their family company for $2.2 million. The trial judge ordered the wife to pay an equalization payment of $101,223.13 to the husband. He found that the husband's average annual income was $644,172 and that the wife's was $484,356, consisting of imputed income on her investment portfolio and income from pensions and other sources. He noted that the wife had failed to maximize the income that she could have earned from the sale of her shares and imputed income to her based on a 6 per cent return. He ordered the husband to pay the wife indefinite spousal support on the low end of the Spousal Support Advisory Guidelines ("SSAGs") in the amount of $5,380. He ordered the wife to pay the husband's costs in the amount of $460,179.57 on a full indemnity basis due to, among other factors, the wife's unreasonable behaviour throughout the litigation. The Court of Appeal allowed the wife's appeal. The court affirmed the equalization payment, but returned the case to the trial judge to reconsider the spousal support and costs issues. At the rehearing, the trial judge increased spousal support to $8,000 per month. He heeded the comments of the Court of Appeal that he had erred on the costs issue by stating that the husband had made an offer to settle which was as good as if not better than the outcome at trial and by stating that the husband had been successful at trial on all material issues. However, he found that the wife had acted in bad faith at the original trial and that the husband should recover a substantial portion of his costs. He reduced the costs award by 30 per cent. The wife appealed.
Held, the appeal should be allowed in part.
In imputing investment income to the wife, the trial judge erred by failing to take account of the tax implications of her receipt of $2.2 million for the sale of the shares. He also erred by double counting certain items in both the "imputed income" and "other sources of income" categories. The trial judge did not err by determining that the wife ought to be earning 6 per cent a year on her capital. The wife's annual income should be adjusted to $203,874. The trial judge did not err in finding that the husband should pay support at the low end of the SSAGs. The spousal support order should be increased to $13,759 per month.
The new costs award made by the trial judge at the rehearing was not unreasonable.
Cases Referred To
- Berta v. Berta (2015), 128 O.R. (3d) 730, 2015 ONCA 918
- Boston v. Boston, [2001] 2 S.C.R. 413, 2001 SCC 43
- Halliwell v. Halliwell, [2017] O.J. No. 2230, 2017 ONCA 349
- Hathaway v. Hathaway, [2014] B.C.J. No. 1996, 2014 BCCA 310
- Hickey v. Hickey, [1999] 2 S.C.R. 518
Authorities Referred To
- Rogerson, Carol, and Rollie Thompson, Spousal Support Advisory Guidelines (Ottawa: Department of Justice Canada, 2008)
- Rogerson, Carol, and Rollie Thompson, Spousal Support Advisory Guidelines: The Revised User's Guide (Ottawa: Department of Justice, 2016)
Appeal
APPEAL from the judgment of R.J. Harper J. (2016), 133 O.R. (3d) 704, 2016 ONSC 5723 (S.C.J.).
Counsel:
Aaron Franks and Michael Zalev, for appellant.
Peter Callahan, for respondent.
Judgment
The judgment of the court was delivered by
A. Introduction
1The appellant, Delia Joan Berta ("Joan"), and the respondent, Raymond Louis Berta ("Ray"), were married for 27 years. They owned equal shares of a business created by Ray during the marriage and developed a lavish lifestyle when the business prospered.
2The marriage ended and the parties could not resolve several financial issues. After a nine-day trial in 2013, Harper J. ordered Joan to make an equalization payment to Ray, and ordered Ray to pay Joan indefinite spousal support on the low end of the Spousal Support Advisory Guidelines ("SSAGs") in the amount of $5,380 per month. Joan was also ordered to pay Ray's costs of $460,179.57 on a full indemnity basis due, inter alia, to Joan's unreasonable behaviour throughout the litigation, including her repeated unproven allegations of fraud against Ray.
3Joan appealed from the trial judge's decision on three grounds: the quantum of spousal support, the equalization payment and the costs award.
4This court allowed the appeal: Berta v. Berta (2015), 128 O.R. (3d) 730, 2015 ONCA 918. The court returned the case to the trial judge to reconsider the spousal support and costs issues "in accordance with the reasons of this Court".
5The parties agreed to file the same material at the rehearing and made only written submissions. No new financial information about the parties was prepared or filed.
6At the rehearing, the trial judge awarded Joan indefinite spousal support of $8,000 per month and awarded Ray costs of $322,125.70.
7Joan appeals both the new spousal support and costs awards.
B. Facts
(1) The Parties and Events
8The parties married in 1982. Joan was 44 and Ray was 37. They did not have children together.
9Ray worked in several jobs in the early years of the marriage. Joan had a senior management position in Stelco in Hamilton.
10In 1986, Ray decided to start a clinical research business. He called it Applied Consumer Clinical Evaluations Inc. ("ACCE"). Joan and Ray were equal shareholders in ACCE, and both were directors of the company. Both contributed labour and funds to the growth of ACCE, but Ray operated the company on a daily basis.
11In 1993, Joan took early retirement from Stelco and set up a consulting business.
12Both businesses flourished, especially ACCE, which became very successful and profitable.
13Joan and Ray enjoyed a lavish lifestyle together, especially in the later years of their marriage. They had expensive homes and vacation properties, travelled extensively, hosted extravagant social events and gave each other very expensive gifts -- a real fire truck for Ray and an antique T-Bird car for Joan.
14The marriage ended in March 2010. Joan and Ray sold their matrimonial home, divided the net proceeds of sale equally and purchased separate homes in Ontario. Joan also bought a small condominium in Florida. Ray purchased Joan's ACCE shares for $2.2 million, payable in part on closing with the balance of $1.85 million to be paid over time.
15The parties were unable to resolve many of the relevant financial issues. They went through a nine-day trial in November 2013.
(2) The Trial
16The trial judge dealt with three issues at the trial -- equalization, spousal support and costs.
(a) Equalization
17The trial judge ordered Joan to pay an equalization payment of $101,223.13 to Ray.
(b) Spousal Support
18Both Joan and Ray called accountants as expert witnesses to provide evidence on determining income for support purposes. The trial judge preferred the evidence of Ray's expert. He found that Joan's expert had improperly acted as an advocate for her, acting as her "[g]eneral to lead her into battle", rather than a neutral expert seeking information to assist the court. He said that, both before and during the trial, Joan and her expert engaged in a relentless quest to demonstrate that Ray had engaged in fraud or some other nefarious activity. Joan's expert also failed to meet with Ray's expert to narrow the issues.
19The trial judge found that Ray's average annual income was $644,172, comprising employment income, CPP, OAS, other pensions, investment income and actual capital gains.
20The trial judge found that Joan had "substantial assets", including a pension, a RRIF account, the money received from her ACCE shares, proceeds from the sale of the matrimonial home and other savings. However, she failed to maximize the income that she could earn from these assets. She did not meet with a financial advisor and kept the funds in a traditional bank account with a low interest rate (between 1.35 and 1.9 per cent). She acknowledged that she had done nothing to ensure that she received the best return on her assets. The trial judge was also critical of Joan's behaviour in two important respects -- non-disclosure of two sources of income and surreptitious removal of money from ACCE when she knew it was in financial distress. Taking account of all these factors, the trial judge fixed Joan's annual income at $484,356"which includes pension income and investment income".
21In light of the parties' incomes, the trial judge observed that the SSAGs indicated that spousal support could be $5,380 in the low range, $6,227 in the mid range and $7,174 in the high range. He concluded that because Joan was "not maximizing her resources after separation", the fairest approach was to order support at the low end of the SSAGs -- $5,380 per month.
(c) Costs
22The trial judge was highly critical of Joan's conduct and positions throughout the litigation, including her "allegations of fraud that were not supported by any evidence". He also referred to Ray's reasonable offers to settle and Ray's success on "all material issues". The trial judge ordered full indemnity costs fixed at $460,179.57.
(3) The First Appeal
23Joan appealed on the issues of equalization, spousal support and costs.
24On the equalization issue, this court upheld the trial judge's analysis and calculation.
25On the spousal support issue, this court concluded that the trial judge's determination of Joan's income was unsustainable and "preclude[d] meaningful appellate review". It returned the issue to the trial judge to be determined "in accordance with the reasons of this Court".
26On the costs issue, this court concluded that the trial judge "fell into error in two ways" -- first, by stating that Ray's offer to settle was "as good as if not better than the outcome at trial"; and second, by stating that Ray had been successful at trial "[o]n all material issues".
27In light of these errors, and against the backdrop of the return of the spousal support issue to the trial judge, this court determined that the costs issue should also be returned to the trial judge "to fix an appropriate award of costs, in light of the relative success of the parties, their conduct at trial, and other relevant considerations under the Rules".
(4) The Rehearing
28The trial judge dealt with two issues at the rehearing -- spousal support and costs. Both parties made written submissions on these issues. They agreed that the trial judge should consider only the original evidence in making his decision; they would not provide an update on their financial positions. The parties agreed that they would decide how to proceed once the trial judge rendered his second decision.
(a) Spousal Support
29On the crucial issue of Joan's sale of her shares in ACCE to Ray, the trial judge concluded that the capital receipts they generated "should only be considered for what they can reasonably yield as income if invested in a reasonable manner". He then considered that income -- using a "generous" 6 per cent return -- and her various pension incomes, and arrived at an average annual income for Joan of $282,119, down from $484,356 at the original trial.
30The trial judge stated that Ray's average annual income was $644,172, the same number as determined at trial.
31Then, in the crucial passage in his reasons in the rehearing, the trial judge reached his conclusion on the spousal support issue:
Based on the income ranges set out above, Raymond should pay the low end of the SSAG calculations. This amounts to $8,000 per month in spousal support. That level of support results in Joan retaining 40% of the Net Disposable Income and Raymond retaining 60%.
(b) Costs
32The trial judge's reasons on the costs issue were brief, so I set them out in full:
With its reasons, the Court of Appeal has also requested a reconsideration of the cost award. Ray Berta submits that this reconsideration by me should make a specific finding that Joan Berta acted in bad faith given my other findings in the original reasons. I agree with these submissions. Although I did not use the term bad faith, my findings describe conduct that amounts to bad faith.
Joan Berta served and filed an offer to settle that the Court of Appeal felt was better than the judgment granted in favour of Ray Berta. They observed that Ray Berta took the position that Joan was not entitled to spousal support, and I found that she was. Taking both of these factors into consideration, it is my view that bad faith amounts to fueling the fire of litigation. Such conduct cannot be condoned, even if an offer was better than the judgment. I view this as similar to a successful party being disentitled to costs when the court finds that they acted unreasonably.
In weighing the considerations of Joan's offer with her conduct amounting to bad faith that drove the litigation, I am of the view that Ray Berta should recover a substantial portion of his costs. Under the circumstance I find that reducing his full indemnity costs by 30 percent would be a fair allotment.
As a result of the above factors, Joan shall pay costs to Ray in the total amount of $322,125.70.
33Joan appeals on both the spousal support and costs issues.
C. Issues
34Joan raises two issues on the appeal:
(1) did the trial judge err by awarding Joan spousal support of $8,000 per month; and
(2) was the trial judge's costs award of $322,125.70 in favour of Ray unfair, unreasonable or clearly wrong?
D. Analysis
(1) Spousal Support
35Joan contends that the trial judge erred by fixing indefinite spousal support at $8,000 per month. She says that this amount is too low. She submits that the trial judge made three errors in arriving at this number -- he erred in calculating Joan's income for support purposes; he erred in applying the low range of the SSAGs; and he made a mathematical error when he applied the SSAGs. I will consider these submissions in turn.
(a) Joan's Income
36The trial judge fixed Joan's annual income at $282,119. He adopted the Court of Appeal's approach, which meant that the income flowed from two sources -- imputed (not actual) income on her investment portfolio ($179,400) and income from other sources, including OAS, CPP, Stelco pension, RRIF income, U.S. benefits, loan income and rental income ($102,719).
37While she submits support should be calculated based on an annual income of $85,000, Joan does not specifically challenge the figure for actual income. She challenges the imputed income figure on two bases.
38First, Joan asserts that the trial judge failed to take account of the tax implications of her receipt of $2.2 million for the sale of her ACCE shares to Ray.
39I agree with this submission. Joan acknowledged in one of her financial documents prepared for the trial that she would have to pay taxes, over a period of years, on the income she received from the sale of her ACCE shares. Ray does not challenge this assertion. The calculation prepared by McGillivray and Associates (a firm retained by Ray to advise both parties about the income tax implications of Joan's sale of her ACCE shares to Ray) established that the cumulative cash Joan would retain after 2016 from the sale of the shares was $1,685,923. I accept this figure.
40Second, Joan submits that the trial judge erred by in effect "double counting" certain items in both the "imputed income" and "other sources" categories of income.
41I agree. The trial judge improperly added to Joan's asset portfolio the value of the RIFF, the income from which is already accounted for in her line 150 income. He also incorrectly included the proceeds from the sale of her matrimonial home which she used to buy a new home and which were not available to invest, as well as amounts for personal property like a car and jewellery, which could not generate income.
42Subtracting the amounts related to these items leaves a final number in the imputed income category of $1,685,923 -- the cumulative cash retained from the share sale.
43Third, Joan contends that the trial judge erred by determining that she should be earning 6 per cent a year on her capital. She says that this is too high a figure for an elderly, conservative investor.
44I do not accept this submission. In its appeal decision, this court used a 6 per cent figure, which it described as "generous", in calculating Joan's potential annual income. In addition, the record established that Joan's RIFF return from 2010 to 2013 was around 6 per cent. Accordingly, while I would not endorse 6 per cent as the usual rate of return to be imputed, I do not fault the trial judge for choosing this number. I do not think that this figure, in the circumstances of this case, with two wealthy and financially savvy spouses, is "predicated upon insensitive standards on how the payee spouse should have managed her finances from the point of separation": see Boston v. Boston, [2001] 2 S.C.R. 413, 2001 SCC 43, at para. 58.
45Combining my conclusions on the three issues raised relating to Joan's income, my ultimate conclusion is that it was appropriate to impute an asset portfolio of $1,685,923. If invested so as to generate an annual return of 6 per cent, the annual income in this category would be $101,155. If this is added to the other income sources totalling $102,719, Joan's total annual income would be $203,874.
(b) The Low Range of the SSAGs
46After determining that Ray's annual income was $644,172 and Joan's annual income was $282,119, the trial judge stated: "Based on the income ranges set out above, Raymond should pay the low end of the SSAG calculations." Joan contends that the trial judge offered no reasons in support of this conclusion and that he erred in choosing to apply the low end of the SSAGs.
47I am not persuaded by these submissions.
48The trial judge concluded that there was no compensatory entitlement to support here. The only entitlement was "non-compensatory" or "needs-based". He also carefully reviewed the financial situations of both parties. It is obvious from a review of his reasons that he concluded that both parties have substantial resources. His treatment of this issue is far removed from a "no reasons" analysis.
49Absent an error in principle, a significant misapprehension of the evidence or an award that is clearly wrong, the trial judge's conclusion on spousal support awards should be affirmed: see Hickey v. Hickey, [1999] 2 S.C.R. 518, at paras. 11-12; and Halliwell v. Halliwell, [2017] O.J. No. 2230, 2017 ONCA 349, at para. 88. This deference is augmented for payor incomes over $350,000 where the SSAGs themselves suggest "pure discretion" as one of two possible approaches: see Department of Justice Canada, Spousal Support Advisory Guidelines (July 2008) (Ottawa: Department of Justice, 2008), at p. 112; and Hathaway v. Hathaway, [2014] B.C.J. No. 1996, 2014 BCCA 310, at para. 46. This approach remains unchanged in the April 2016 Revised User's Guide. I cannot say that the trial judge's decision to make a spousal support order at the low end of the SSAGs calculation amounts to any of the errors set out in Hickey and Halliwell.
50Finally, I note that in oral argument Joan conceded that the mid range of the SSAGs would be "a bit high".
51For these reasons, I conclude that the trial judge did not err by purporting to apply the low end of the SSAGs when calculating Ray's support obligation.
(c) The Mathematical Error
52The trial judge's ultimate conclusion on the spousal support issue was:
Based on the income ranges set out above, Raymond should pay the low end of the SSAG calculations. This amounts to $8,000 per month in spousal support. That level of support results in Joan retaining 40% of the Net Disposable Income and Raymond retaining 60%.
53Joan contends that the trial judge's intent here was to order support at the low end of the SSAGs range. The order of $8,000 per month was simply a mathematical error in applying this intent. To support this, she refers to the trial judge's original decision:
The spousal support calculations given my findings are as follows: $5,380 for low, $6,227 for mid and $7,174 for high.
Given my findings relating to Joan not maximizing her resources after separation, I am of the view that the fairest approach is to order support that is at the low end of the SSAG calculations.
For the foregoing reasons, I am ordering spousal support in the amount of $5,380 per month.
54Ray concedes that based on an income for him of $644,172 and an income for Joan of $282,119, the support payable at the low end of the range is $11,314. He argues, however, that it is the trial judge's last sentence about the net disposable income split of 40/60 that reflects his true intent. In this way, on the trial judge's income findings, Joan would be entitled to $6,173 per month.
55I agree with Joan on this point.
56The decision under appeal was a rehearing further to direction from this court on appeal. On that first appeal, this court found no error in the initial decision's application of the low end of the SSAGs. Furthermore, there was no stated intent in the trial judge's rehearing decision to depart from this original choice. All this given, I would agree with Joan that the trial judge intended to apply the low end of the SSAGs range to the revised calculation of Joan's income and simply made a mathematical error in calculating this amount (as well as in calculating the net disposable income split).
57I would accordingly apply the low end of the SSAGs to the corrected income figure of $203,874 to generate the appropriate spousal support amount. This amounts to $13,759 per month in spousal support.
(2) Costs
58At the first trial, the trial judge awarded Ray full indemnity costs fixed at $460,179.57.
59On appeal, this court identified two errors in the trial judge's costs analysis -- his treatment of Ray's offer to settle and his conclusion that Ray had been successful at trial "[o]n all material issues". The court returned the costs issue to the trial judge "to fix an appropriate award of costs, in light of the relative success of the parties, their conduct at trial, and other relevant considerations under the Rules".
60At the rehearing, the trial judge made a specific finding that Joan acted in bad faith at the original trial. However, he heeded the comments of this court and concluded that Ray should recover "a substantial portion of his costs", not full indemnity. He reduced the full indemnity costs by 30 per cent and awarded Ray costs of $322,125.70.
61Joan submits that this costs award is unreasonable, especially since she was "successful" on the spousal support issue.
62I do not accept this submission. The trial judge was in the best position to assess the parties' conduct before and during a nine-day trial. In both his trial and rehearing reasons, he made explicit negative findings about Joan's conduct. In his rehearing reasons, the trial judge specifically stated that his findings at the trial "describe conduct that amounts to bad faith".
63In its appeal reasons, this court referred to the trial judge's findings that "the Wife and her expert both acted unreasonably throughout the litigation" and "the Wife also made baseless allegations of fraud against the Husband", and continued: "These findings are amply supported by the evidentiary record. They strongly support an award of costs to the Husband on a full recovery basis."
64Importantly, at the rehearing, the trial judge, taking account of this court's comments in its appeal reasons, reduced the costs award in favour of Ray by about $138,000.
65In the end, I cannot say that the new costs award made by the trial judge at the rehearing -- $322,125.70, not full indemnity costs of $460,179.57 -- even approaches being unreasonable.
E. Disposition
66I would allow the appeal in part on the spousal support issue and order that the respondent pay spousal support to the appellant in the amount of $13,759 per month.
67I would dismiss the appeal on the costs issue.
68Success on the appeal is divided. I would order that each party bear its own costs of the appeal.
Appeal allowed in part.
End of Document
