CITATION: Phelps v. Childs, 2017 ONSC 1443
DIVISIONAL COURT FILE NO.: DC 15-2146
DATE: 2017/05/30
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
Heeney R.S.J., Morawetz R.S.J., Ellies J.
B E T W E E N:
RYAN TIMOTHY PHELPS
Self-represented
Appellant
- and -
ZOE MICHELLE JULIA CHILDS
Kellie Stewart, for the Respondent
Respondent
HEARD: February 21, 2017 at Ottawa
REASONS FOR DECISION
BY THE COURT:
OVERVIEW
[1] The appellant appeals and the respondent cross-appeals the result of a trial in which the three main issues were equalization of net family property, spousal support payable to the appellant, and retroactive child support payable to the respondent.
[2] The appeal comes to us under s. 19(1.2) of the Courts of Justice Act, R.S.O. 1990, c. C.43 because the amounts at issue are less than $50,000.
[3] For the following reasons, we allow both the appeal and the cross-appeal in part.
BACKGROUND
[4] The parties were married in November 2005, and separated in April 2013. They have three children.
[5] Prior to the marriage, the respondent had been involved in a serious car accident which left her paralyzed from the waist down. As a result of the accident, she received money by way of cash and structured settlements. From the $308,020 she received in cash, she purchased a property and built a house designed to accommodate her disability. This home eventually became the matrimonial home. During the marriage, the respondent transferred the home into the names of both of the parties.
[6] There were two structured settlements. One had a capital cost of $850,000 and the other had a capital cost of $400,000. The former paid the respondent a sum each month, which increased yearly and was approximately $4,000 per month at the time of trial. The latter paid her an increasing sum on December 1 of each year, which was approximately $20,000 at the time of trial.[^1]
[7] Despite her disability, the respondent worked part-time at a bank. The appellant is a musician who taught piano, among other things.
[8] The trial judge appears to have accepted the appellant’s evidence that he devoted most of his time during the marriage to family-related matters and was, therefore, unable to establish a full-time career (May 29 Reasons, para. 26). This finding is not challenged on appeal.
[9] Prior to the trial, the parties resolved the issues of custody and access. They also agreed that the value of the matrimonial home as of the date of separation was $467,500.
[10] At trial, the appellant sought spousal support for a period of two years following separation. He also sought an equalization payment of $52,014.49, including his interest in the matrimonial home.
[11] The respondent sought retroactive child support and also sought an order that her shares in a company called “Sequitur Labs Inc.” (the “Sequitur shares”) were purchased with money that represented damages for personal injuries and were, therefore, excluded property under subsection 4(2), para. 3, of the Family Law Act, R.S.O. 1990, c. F3 (the “FLA”).
[12] The trial judge dismissed the appellant’s claim for support and the respondent’s claim for retroactive child support. He assessed the appellant’s liability for extraordinary expenses under s.7 of the Child Support Guidelines (“CSG”) for 2013 in the amount of $600 and for 2014 in the amount of $1,200. He ordered that the appellant pay extraordinary expenses in the amount of $100 per month for 2015, to be adjusted based on the parties’ incomes after January 1, 2016.
[13] The trial judge ordered that the appellant transfer his interest in the matrimonial home to the respondent and that the equity in the home be divided equally between the parties after the deduction of joint debts. He dismissed the respondent’s claim regarding the Sequitur shares and ordered that she pay the sum of $27,829 to the appellant by way of equalization of the parties’ net family property. This sum represented the net value of the appellant’s interest in the matrimonial home ($48,604.32), less the equalization payment the trial judge found owing by the appellant to the respondent ($20,775.23). The trial judge ordered that the equalization payment be paid in equal monthly installments of $1,000, with a final payment of $829. He made no order for the payment of interest on that sum.
[14] Lastly, the trial judge ordered that the appellant pay costs to the respondent in the amount of $12,000, also at the rate of $1,000 per month, without interest.
ISSUES
[15] This appeal raises the following issues:
(1) Did the trial judge err in the values he used for each party’s net family property, other than the matrimonial home?
(2) Did the trial judge err in ordering that the full value of the Sequitur shares be equalized?
(3) Did the trial judge err in failing to use the value of the outstanding mortgage as at the time of trial, rather than at the time of separation, in calculating the value of the appellant’s equity?
(4) Did the trial judge err in failing to order that the respondent pay occupation rent to the appellant for her use of the home between the date of separation and the trial?
(5) Did the trial judge err in deducting property taxes from the appellant’s share of the matrimonial home?
(6) Did the trial judge err in ordering the equalization payment to be made over time?
(7) Did the trial judge err in dismissing the respondent’s claim for retroactive spousal support?
(8) Did the trial judge err in ordering the appellant to pay $100 per month in s.7 expenses?
(9) Did the trial judge err in dismissing the respondent’s claim for retroactive child support?
(10) Did the trial judge err in ordering the appellant to pay costs?
STANDARD OF REVIEW
[16] Errors of law on the part of a trial judge are reviewable on a correctness standard. Where a legal principle is readily extricable from a question of mixed fact and law, it is also reviewable on a correctness standard: Housen v. Nikolaisen, 2002 SCC 33, [2002] 2 S.C.R. 235.
[17] Ordinarily, findings of fact, and issues of mixed fact and law that cannot readily be separated from one another, are reviewable on the more deferential standard of palpable and overriding error: Housen. In the family law context, the Supreme Court of Canada has stated that appellate courts must give considerable deference to the findings of trial judges. An appellate court should only intervene if there is a material error, a serious misapprehension of the evidence, or an error in law: Hickey v. Hickey, 1999 691 (SCC), [1999] 2 S.C.R. 518, at p. 526.
[18] This deferential standard cannot be maintained, however, in the absence of adequate reasons. Where an order is made without adequate reasons, unless the reasons are implicit or patent on the record, an appellate court has no access to the reasoning underlying the order and cannot afford it deference: Lawson v. Lawson (2006), 2006 26573 (ON CA), 81 O.R. (3d) 321 (Ont. C.A.), at para. 13.
[19] Regrettably, as we will explain, this court is not able to defer to the trial judge with respect to several of the issues raised in this appeal.
ANALYSIS
Did the trial judge err in the values he used for each party’s net family property, other than the matrimonial home?
[20] As often happens, the parties had differing values for the assets owned by each party on the date of marriage and on the date of separation (the valuation date, in this case). The appellant submits that the respondent understated the value of the property he owned on the date of marriage, failed to list all of the household items and undervalued a car she retained on the valuation date, and overstated the value of the property the appellant retained on that date. In contrast, the appellant submits that he provided a detailed list of the value of all the items of personal property he brought into the marriage and retained following the separation, supported with documentary evidence.
[21] According to the appellant’s net family property statement (“NFP”), he was owed the sum of $3,410.17 for equalization, whereas the respondent’s NFP indicated that she was owed the sum of $20,775.23. The trial judge ultimately agreed with the respondent.
[22] The appellant submits that the trial judge failed to conduct any analysis or to explain why he found in favour of the respondent on this issue. With respect, we agree.
[23] The trial judge issued three sets of reasons. In the first, released on May 29, 2015 (2015 ONSC 3042), the trial judge failed to deal with the issue of equalization. He subsequently released reasons on July 28, 2015 (2015 ONSC 4819), in which he dealt with that issue. His discussion of the disparity between the parties’ positions and his decision with respect to the parties’ positions occupied only three paragraphs of those reasons, as follows:
[4] With respect to division of Net Family Property, the [May 29, 2015] decision only related to the division of the matrimonial home as well as the interest in the Sequitur shares. To summarize the parties’ position with respect to other properties (sic), the applicant claims that he would receive $48,604.32, being one-half of the net equity in the home, plus an additional $3,410.17, for a net payment to him of $52,014.49.
[5] The respondent’s calculation shows that the applicant would receive one-half of the net equity in the home, $48,604.32, less equalization owed by the applicant to respondent of $20,775.23, for a net payment to the applicant of $27,829.09.
[6] After a review of the respective Net Family Property statements and counsels’ submissions at the trial, I find that the respondent’s position is correct and, accordingly, a payment shall be made by the respondent to the applicant in the amount of $27,829.09.
[24] As the Ontario Court of Appeal stated in Lawson, at para. 9:
It is the duty of a judge to give reasons for decision; it is an inherent aspect of the discharge of a judge’s responsibilities. See R v. Sheppard (2001), 2002 SCC 26, 162 C.C.C. (3d) 298 (SCC). The appellant is entitled to reasons that are sufficient to enable him to know why issues were decided against him. The reasons need to be adequate also so that he can bring a meaningful appeal and this court is able to properly review the order. The reasons do not need to be perfect. Nor do they necessarily need to be lengthy. But, they must be sufficient to enable the parties, the general public and this court, sitting in review, to know whether the applicable legal principles and evidence were properly considered.
[25] The respondent submits that an extensive part of the evidence called at trial dealt with the value of the parties’ assets as of the date of marriage and the date of separation. Based on the excerpts from the transcripts to which we have been taken, that appears to be true. However, the volume of evidence called on the issue makes it more important that adequate reasons be provided, not less.
[26] The reasons of the trial judge in this case are not sufficient to enable us to know whether the applicable legal principles and evidence were properly considered. For that reason, we must allow the appeal on this issue.
[27] We will address the appropriate order to make with respect to this issue, and all of the other issues, once we have completed our analysis.
Did the trial judge err in ordering that the value of the respondent’s Sequitur shares be included in her NFP calculation?
[28] It was not disputed at trial that the respondent’s father lent the parties $21,000 to purchase the Sequitur shares under an agreement to repay him just after December 1, when the respondent received her yearly annuity payment. Counsel for the appellant conceded at trial that the funds were traceable to the respondent’s annuity (see transcript of January 8, 2015, p. 5, l. 1). The respondent argued that, because her portion of the shares was paid for with funds traceable to damages she received for personal injuries, it was excluded property under para. 3 of subsection 4(2) of the FLA. This provision excludes from property that a spouse owns on the valuation date:
- Damages or a right to damages for personal injuries, nervous shock, mental distress or loss of guidance, care and companionship, or the part of a settlement that represents those damages.
[29] The trial judge found that the funds used to purchase the shares came from monies lent to the couple by the respondent’s father and that he was paid back from funds that came into household income from the respondent’s structured settlement (May 29 Reasons, para. 41). However, he held that the respondent had “failed to establish the basis upon which an unequal division of these shares can be granted” (para. 42). Therefore, he issued an order “dividing the Sequitur … shares equally between the parties” (para. 43).
[30] The respondent argues that the trial judge misunderstood the basis for her claim at trial. At trial, she sought an order that the Sequitur shares were excluded property, not an order for unequal division of non-excluded property. The appellant argues that the trial judge was correct because the respondent failed to prove that the loan from the father was repaid from monies received for personal injuries. Notwithstanding his lawyer’s concession at trial, he submits that, because the funds received from the father and the annuity payments were both placed in the parties’ joint bank account, they were not traceable to the damages the respondent received. The appellant also argues that, because the loan to the father was repaid from the joint bank account, the respondent failed to rebut the presumption of joint ownership created by s.14(1) of the FLA.
[31] While our decision was under reserve, the Ontario Court of Appeal released its decision in Hunks v. Hunks, 2017 ONCA 247. In Hunks, the Court of Appeal held that personal injury damages received by a spouse as payments from an annuity purchased under a structured settlement were income, and not property, under the FLA.
[32] Following the release of the decision in Hunks, we requested written submissions from the parties regarding the effect of the decision on the issues in this appeal. With respect to this issue, the respondent makes two submissions. First, she submits that the appellant did not argue that the annuity payments were income at trial or on appeal. Second, she submits that the decision in Hunks is distinguishable. We disagree with both submissions.
[33] The appellant did argue, both at trial and on appeal, that the respondent’s annuity receipts were income.[^2] However, he made this argument in connection with his claim for spousal support, and not in connection with the respondent’s claim for exclusion of the Sequitur shares. With respect to his claim for spousal support, the appellant argued that the fact that the annuity was purchased with funds paid as damages for personal injury did not preclude the payments being treated as income. Based on the jurisprudence as it existed at that time, he contended that the respondent had not established either that the annuity was purchased from funds paid as damages for future care costs or that the payments were being used for that purpose: see Rivard v. Hankiewicz, 2007 ONCJ 180.
[34] More importantly, even if the appellant had not argued that the annuity payments were income, we are bound to treat it as such by virtue of the Court of Appeal’s decision in Hunks. The Court of Appeal held, as a matter of law, that payments received from an annuity purchased as part of a structured settlement are income, and not property, under the FLA. We are bound by that pronouncement of the law.
[35] The respondent argues that Hunks is distinguishable from the present case because the court in Hunks found that the annuity in that case had been purchased using funds paid as damages for future loss of income, whereas the evidence at trial in this case established that the annuities were purchased from funds paid for the costs of future care. Again, we disagree with both of these submissions.
[36] With respect to the respondent’s first submission, the evidence in this case did not establish that the annuities were purchased using funds paid as damages for the costs of future care. The evidence at trial was to the effect that the settlement funds were paid in lump sums without any breakdown. The respondent’s claim for accident benefits was settled for the lump sum of $850,000, without any breakdown of the amounts paid with respect to the various accident benefits available to her. Her claim for damages under the OPCF-44 endorsement was likewise settled for the lump sum of $750,000, without any breakdown of the amounts paid under the various heads of damages available in tort, such as pain and suffering, past or future loss of income, or costs of future care.
[37] The respondent maintains, nonetheless, that it is a fair inference that the annuities in her case were purchased with funds paid for future care costs because those costs were estimated at approximately $1.6 million, which sum far exceeded the total amount for which her claims were settled. We fail to see how that inference can be drawn on this evidence. Certainly, it is not borne out by what the evidence discloses about how the annuity payments were spent. Virtually all of the income received by the respondent was treated as family income. The respondent’s sworn financial statement showed that she spent less than $200 per month on health-related expenses.
[38] With respect to the respondent’s second submission, the Court of Appeal in Hunks did not hold that the annuity in that case had been purchased from monies paid as damages for loss of income. The wife’s position at trial was that no particular head of damages in the settlement monies had been used to buy the annuity. The husband’s position was that the annuity had been purchased from funds paid as damages for loss of future income (see para. 20). No evidence was called on the issue and the parties had filed separate statements of fact. The Court of Appeal held that the parties had agreed on the facts necessary to decide the legal issue of whether the annuity was property or income under the FLA, notwithstanding the differences in their positions. However, it held that the trial judge was wrong to decide the question of whether the annuity was excluded property in the absence of sworn evidence or an agreed statement of fact on the source of the funds.
[39] The Court of Appeal held, implicitly if not explicitly, that the source of the funds used to purchase the annuity is irrelevant on the issue of the whether the annuity is income or property. Writing for the court, Gillese J.A. focused on the fact that the structure was used to provide the wife with a stream of income to replace what she had lost as a result of the accident, rather than focusing on what part of the settlement proceeds paid for it. She likened the stream of income to disability benefits, as distinguished from a pension. Relying on the Court of Appeal’s decision in Lowe v. Lowe (2006), 2006 804 (ON CA), 78 O.R. (3d) 760, she held that they were income. She wrote, at para. 59:
Like the annuity payments in Lowe, the SS Annuity [the structured settlement annuity] payments replace, in whole or in part, the employment income that Ms. Hunks would have earned had she been able to work. The SS Annuity payments give her financial support because she cannot work. They are, therefore, of the same nature as the income that she would have earned had she not been injured. Just as disability benefits are more comparable to a future income stream based on personal service than a retirement pension, so too are the SS Annuity payments. Annuities are usually purchased with savings. Not so the structured settlement annuity. As we have seen, an individual cannot purchase a structured settlement annuity. Furthermore, structured settlements can only arise from a settlement for a damages claim based on personal injury or death. Clearly, the SS Annuity was not purchased from personal savings nor is it a form of savings. The SS Annuity, as a structured settlement, is designed to provide income to Ms. Hunks that she would have been able to earn, had she not been injured.
[40] There is nothing to distinguish the structured settlement annuity in this case from the one at issue in Hunks. As we have mentioned, the funds received from the annuities in this case are being used as a stream of income. As those funds were used to repay the loan advanced to purchase the Sequitur shares, those shares were paid for with income, and not property, excluded or otherwise.
[41] Therefore, the cross-appeal on this issue must fail.
Did the trial judge err in failing to use the value of the mortgage outstanding at the time of trial?
[42] At trial, the respondent sought an unequal division of net family property with respect to the matrimonial home. The trial judge dismissed her request. Instead, he calculated each party’s equity in the home by deducting from the agreed upon value of the home ($467,500), the amounts that both parties included in their NFP’s for joint debts as of the date of separation,[^3] including the amount outstanding on the mortgage, and attributing half of the net result to each of the parties.
[43] The appellant submits that the trial judge erred by treating his interest in the jointly owned matrimonial home as something that could be equalized. He argues that, in equalizing his interest in the matrimonial home, the trial judge failed to recognize that he was a joint owner of the home and that the home should be sold, to allow him to realize his interest in it and to address the financial disadvantages that he has suffered as a result of the marriage.
[44] This submission contradicts the appellant’s position at trial. As the respondent points out, and as the trial judge recognized in his reasons of October 11, 2015 (2015 ONSC 6418, at para. 2), throughout the trial, there was no suggestion that the matrimonial home should be dealt with in any manner other than equalization as of the date of separation. The appellant testified in cross-examination that, prior to trial, he had relinquished his request that the house be sold (January 7, 2015 transcript, p. 1, l. 30). This is understandable, as the home had been built by the respondent and her family to accommodate the devastating effects of the accident in which she was involved.
[45] The appellant also submits that the trial judge erred by not deducting the amount owed on the mortgage at the time of trial, rather than the amount owed as of the date of separation. The value of the mortgage outstanding at the time of separation was $252,594.22. The appellant testified that the amount of the mortgage outstanding at the time of trial was $238,000 (see January 7, 2015 transcript, p. 43, l. 24).
[46] We are unable to accept the appellant’s argument. Once again, it is at odds with the way in which the parties proceeded at trial.
[47] As we stated earlier, the parties proceeded on the basis that the appellant’s interest in the matrimonial home was to be equalized as part of the parties’ net family property, rather than realized as a joint owner. Equalization occurs based on the value of the parties’ assets as at the valuation date, being the date of separation in this case. Had the appellant’s interest in the home been valued as of the date of the trial, the trial judge would also have had to account for the fact that the respondent was the one responsible for making the mortgage payments from the date of separation forward.
[48] For these reasons, we dismiss this ground of appeal.
Did the trial judge err in not ordering the respondent to pay occupation rent?
[49] This ground of appeal is closely related to the last.
[50] In connection with his arguments about his equity in the matrimonial home, the appellant submits that the trial judge ought to have ordered that the respondent pay occupation rent for her use of the matrimonial home following the date of separation.
[51] Again, we believe that this argument must fail. The appellant never pleaded that he should be paid occupation rent. It would have been an error for the trial judge to have ordered the respondent to pay occupation rent in the absence of a request for that relief: Kazuk v. Shuglo, 2015 ONSC 5381.
[52] Even if the appellant had pleaded that the respondent should pay occupation rent, the claim would likely have been worth little, if anything. Where such a claim is made, the court must take into account the expenses paid by the occupying spouse after the date of separation: Griffiths v. Zambosco (2001), 2001 24097 (ON CA), 54 O.R. (3d) 397, at para. 49. The respondent’s financial statement sworn on November 29, 2014 indicates that she was paying expenses relating to the matrimonial home in excess of $2,500 per month.
[53] For the foregoing reasons, we also dismiss this ground of appeal.
Did the trial judge err in holding the appellant liable for property taxes?
[54] The appellant submits that, if the trial judge was not going to recognize his continuing interest in the matrimonial home up to the date of trial, he ought not to have held that the appellant was liable for his share of the property taxes.
[55] We disagree.
[56] The trial judge only held the appellant liable for property taxes up to the date of separation. There was nothing inconsistent between the trial judge’s approach to calculating the value of the appellant’s interest in the matrimonial home by way of equalization and his ruling that the appellant was responsible for his one-half of the property taxes up to that date.
[57] We also dismiss this ground of appeal.
Did the trial judge err in ordering that the equalization payment be made over time?
[58] The appellant argues that the trial judge had no authority to make an order that allowed the respondent to make the equalization payment over time. This is incorrect. Subsection 9(1)(c) of the FLA permits a judge to order that an equalization payment be paid in installments over a period not exceeding ten years, in order to avoid hardship.
[59] However, under s. 9(1)(c), before such an order can be made, the payor must establish hardship. The trial judge provided no reasons for making the order.
[60] Moreover, the appellant also submits that neither party asked at trial that the equalization payment be made over time. This is not denied. Just as it would have been an error for the trial judge to have ordered the respondent to pay occupation rent where no such relief was requested, it was an error to permit the respondent to make the equalization payment over time in the absence of such a request on the part of the respondent. This is especially true where, as the trial judge found in this case, the appellant was unable to reach his full earning potential due to his devotion to his family, therefore increasing the importance to him of realizing on his interest in the matrimonial home.
[61] For these reasons, the appeal is allowed on this issue.
Did the trial judge err in not ordering the respondent to pay retroactive spousal support?
[62] At trial, the appellant sought retroactive spousal support for a period of two years from the date of separation. In total, he sought the sum of $10,000, based on support of $450 per month.
[63] In response, the respondent sought an order imputing income to the appellant. She also argued that spousal support ought not to be paid from her annuity income on the basis that the annuities were not purchased with funds paid as damages for loss of income.
[64] The trial judge refused to impute any income to the appellant beyond that which he had actually earned. With respect to the respondent’s income, the trial judge found that the two structured settlements paid the respondent the total sum of $68,458.15 in 2013. These amounts were received tax-free. In addition, the trial judge found that, following the parties’ separation, the respondent received child tax credits and universal trial child care benefits totaling $19,380 in the same year.
[65] Despite finding that the appellant had not been able to reach his full earning potential due to the family duties he assumed, the trial judge held:
Although the Respondent had during [2013 and 2014] in excess of $80,000.00 being deposited into her bank account, I am not persuaded that any of that amount would qualify as income for the purpose of calculating spousal support payable by her
[66] The Court of Appeal’s decision in Hunks significantly affects this issue, as well. The court in Hunks held that payments received under a structured settlement annuity should be treated as income and not property “for the purposes” of the FLA (para. 63). Given our conclusion that this case is indistinguishable from the facts in Hunks, it follows that the respondent’s annuity income must be treated as income for the purposes of spousal support, just as it is for the purpose of equalization.
[67] However, while the appellant claimed only $10,000 at trial, before us he sought retroactive spousal support in the amount of $550 per month, for a total of $13,200. We will not allow the appellant to resile from his position at trial. It is a patent effort on his part to retry the case before us, which is not our function: Lawson, para. 11.
[68] The appeal is allowed on this issue. Given the demonstrated entitlement of the appellant, and the gross disparity between his income and that of the respondent (once her structured settlement income is included), spousal support of $450 per month, for a limited duration of two years totalling $10,000, is amply justified.
Did the trial judge err in ordering the appellant to pay $100 per month in s.7 CSG expenses?
[69] In his endorsement dated October 16, 2015 (2015 ONSC 6418) relating to the settlement of the final order, the trial judge ordered the appellant to pay s. 7 expenses in the amount of $100 per month for 2015 and then to pay his proportionate share based on the parties’ respective incomes for 2016, forward.
[70] The appellant contends that the trial judge contradicted himself with respect to the issue of s.7 expenses for 2015.
[71] In his May 29 Reasons, at para. 30, the trial judge wrote:
Any future Section 7 expenses incurred will be charged to the Respondent’s capital payments in her structured settlement.
[72] The appellant submits that it is inconsistent for the trial judge to order him to pay anything towards the future s.7 expenses in light of this ruling. He also contends that the trial judge erred in ordering him to pay anything for s.7 expenses in 2015 because there was no evidence as to what, if any, such expenses would be incurred in that year.
[73] We do not accept these arguments.
[74] The trial judge’s ruling at para. 30 must be read in context. When that is done, it is clear that what the trial judge meant is that the respondent’s contribution towards s. 7 expenses would be paid not just out of the income she earned working part-time at the bank, but also out of the annuity payments she received from her structured settlement.
[75] The evidence at trial established that the children’s extra-curricular expenses totalled $16,826.15 for 2014. The trial judge observed, at para. 27:
No doubt these monies continue to be expended because of the substantial tax free monies accruing to the Respondent.
[76] At para. 28 of his reasons, the trial judge wrote:
Any calculation of income for the purpose of Section 7 expenses of necessity will have to be arbitrary. To calculate Section 7 expenses based on the income of the Applicant, $18,000.00 (2013) and $34,525.00 (2014), and only the taxable income of the Respondent (ignoring the Respondent's structured settlements) would be grossly unfair to the Applicant and not affordable by him. [Emphasis in original.]
[77] It is implicit that the trial judge concluded that substantial s. 7 expenses would be incurred on a continuing basis. What the trial judge did by assessing the appellant’s liability for 2014 and 2015 at only $100 per month was to cap his exposure to s.7 expenses that the trial judge found would continue in 2015.
[78] We do not believe that the trial judge erred in his approach.
[79] This ground of appeal is therefore dismissed.
Did the trial judge err in dismissing the respondent’s claim for retroactive child support?
[80] In July, 2014, the parties consented to an order that the appellant pay child support in the amount of $615 per month.
[81] At trial, the respondent sought an order imputing income to the appellant in the amount of $20,000 for the year 2013. Her request was denied. As mentioned earlier, the trial judge found that the appellant’s income for 2013 and for 2014 was $18,000 and $34,525 (after deducting expenses), respectively. He held that “an order shall go requiring child support based on that income”.
[82] The respondent also sought an order that the appellant pay retroactive child support in the amount of $7,860.22. However, despite holding that the appellant should pay child support based on his 2013 and 2014 income, the trial judge dismissed the appellant’s claim for retroactive child support in its entirety. His reasons for doing so were brief. He wrote (May 29 Reasons, para. 32):
There was insufficient evidence tendered in this trial which would convince me that the appellant had an income which would require child support payable prior to the consent order.
[83] With respect, once again the trial judge’s reasons fail to explain why he reached the conclusion he did.
[84] At trial, over the objection of respondent’s counsel, the appellant filed a “trial brief” that included written submissions on the issues (appellant’s compendium, Tab 7). In the brief, at para. 152, the appellant submitted:
Based on the Applicant’s income for 2013 and 2014, unless this Court reduces the amount of child support payable under section 10 of the Federal Child Support Guidelines as a result of the financial hardship suffered by the Applicant, the Applicant concedes that he owes child support arrears to the Respondent of approximately $1,304 for 2013 and approximately $2,573 for 2014.
[85] If the trial judge’s reason for dismissing the respondent’s claim for retroactive child support was the appellant’s request contained in the aforementioned paragraph, he was in error. The trial brief was not a pleading. The appellant concedes that he never pleaded that child support should be reduced under s.10 of the CSG on the basis of financial hardship.
[86] For this reason, the appeal on this issue is allowed.
[87] Although the respondent also contests the amount that the appellant conceded he owed for child support arrears in his trial brief, she indicated through counsel before us that she is prepared to accept his figure of $3,877.
Did the trial judge err in ordering the appellant to pay costs?
[88] The trial judge issued a separate ruling with respect to costs, dated December 4, 2015, after receiving submissions from the parties. In those submissions, the appellant sought costs in the amount of $32,757.56. This was comprised of $20,168.56 paid to counsel and costs for the appellant’s own time in the amount of $12,139, both inclusive of disbursements. He also sought costs against counsel for the respondent.
[89] For her part, the respondent sought costs in the amount of $15,000 on a partial indemnity basis.
[90] The trial judge dismissed the appellant’s claim for costs against counsel. He rejected the appellant’s submission that the respondent’s counsel was responsible for impeding settlement. In doing so, he referred to a text that the appellant sent to the respondent after the trial ended in which he suggested she sue her lawyer. The trial judge wrote, at para. 3:
Having had the opportunity to observe the demeanor of the Applicant at trial and, in particular, reviewing a January 9th email to the Applicant to the Respondent, I am not surprised that counsel for the Respondent only wanted to deal with the Applicant in writing.
[91] The trial judge also rejected the appellant’s submission that the respondent’s lawyer was unprepared for trial (para. 4).
[92] In the dispositive part of his reasons, the trial judge wrote, at paras. 6 and 7:
There was divided success of the issues in this trial. However, the issues of child custody and limitation of spousal support claimed by the Applicant were only agreed to by the Applicant on the eve of trial. Although those issues were settled by the time the trial started, the Respondent was required to be prepared to defend those issues up to the settlement date.
I have reviewed the offers to settle and I am satisfied that a proper award of costs in this matter, taking into account all of the factors set out in Rule 24 of the Family Law Rules, is $12,000, inclusive of HST and disbursements, payable by the Applicant to the Respondent…
[93] The applicant challenges the trial judge’s ruling on a number of grounds. He contends:
a. that both parties, and not the appellant alone, compromised during the settlement conference at which the issues of custody and access, as well as the value of the matrimonial home, were settled;
b. that the respondent took positions at trial without providing authorities or evidence;
c. that the respondent’s position at trial made compromise impossible;
d. that he made many more attempts to limit the scope and duration of the proceedings than did the respondent; and
e. that the trial judge was incorrect to reject his submission that the respondent was unprepared for trial.
[94] These are all fact-based challenges. The appellant has not taken us to any evidence that would demonstrate that the trial judge, who was a witness to the entire proceeding, made any palpable and overriding errors.
[95] The appellant also submits that his offers to settle prior to trial were more reasonable than those of the respondent and that the trial judge failed to provide any analysis with respect to the offers to settle. We agree that the trial judge did not provide an analysis with respect to the offers to settle. However, having reviewed those offers, we would not interfere with the trial judge’s costs order.
[96] The offers to settle dealt with more than just the issues that proceeded to trial. They also dealt with issues of custody and access. These issues, as the trial judge found, were only agreed upon on the eve of trial. As the trial judge held, the respondent was, therefore, required to be prepared to deal with those issues until then. This finding must be weighed against the submission that the appellant’s offers were more reasonable than those of the respondent.
[97] The appellant also contends that he was more successful at trial than the respondent. He submits that he was the successful party on six of eight issues. That may be true. However, it is also true that the trial judge recognized that success was divided.
[98] Where success is divided, rule 24(6) of the Family Law Rules O. Reg. 114/99, as amended, permits the court to apportion costs “as appropriate”. Rule 24(4) provides that, even where a party has been successful, he may be deprived of all or a part of his costs or ordered to pay all or a part of an unsuccessful party’s costs where he has behaved unreasonably. This rule is as applicable to the question of apportionment on divided success as it is to the situation where one party has been entirely successful.
[99] The trial judge in this case apportioned costs by taking into account more than simply the number of issues on which each party was successful. In our view, there was no error committed by him in doing so.
[100] Contrary to the appellant’s submissions, the trial judge did make findings concerning the appellant’s conduct as it affected the trial. In his reasons of October 16, 2015, the trial judge found that the appellant was “disingenuous” to suggest that the trial had proceeded on any basis other than that the matrimonial home was to be equalized. The trial judge also made findings regarding the January 9 text, the appellant’s demeanor at trial, and the appellant’s position prior to settling the issues at the settlement conference. As he was entitled to do, the trial judge took these things into account and balanced them against the contents of the offers to settle and the results at trial.
[101] A trial judge’s costs decision is highly discretionary. It ought not to be set aside absent a showing that it was clearly wrong or that the judge made an error in principle: Hamilton v. Open Windows Bakery Ltd., 2004 SCC 9, [2004] 1 S.C.R. 303, [2004] S.C.J. No. 72, at para. 72. The appellant has demonstrated neither of these things here.
[102] Where the result at trial is substantially altered on appeal, it is often appropriate to vary or to vacate the costs order made at trial, as well. However, as we have pointed out, the costs order in this case was not based on the degree to which each party succeeded with respect to the various issues dealt with at trial. For this reason, we would not interfere with the trial judge’s order as it relates to costs.
CONCLUSION
[103] The scope of our powers on this appeal are set out in section 134 of the Courts of Justice Act. Those powers include the power “to make any order or decision that ought to or could have been made by the court appealed from” and the power “to make any other order or decision that is considered just”. Where an appellate court has all of the materials before it necessary to do so, it may make a determination on an issue, rather than remit the matter for a further hearing: Sahoto v. Sahoto 2016 ONSC 314 (Div. Ct). Unfortunately, that is not possible with respect to the issue of equalization of net family property in this case. There is conflicting evidence with respect to the value of the parties’ personal property that cannot be resolved in an appeal.
[104] However, during argument, the appellant and counsel for the respondent were asked for their positions with respect to what should occur in the event that the appeal was allowed with respect to equalization. The appellant indicated that he would be content if the court treated the parties’ net family property, apart from the matrimonial home, as being divided equally. Counsel for the respondent indicated that the entire matter should be sent back for a new trial, even though the amounts at issue make a second trial cost-ineffective.
[105] In the interest of attempting to do justice between the parties and in light of the results of the appeal, we would propose the following, based on the appellant’s willingness to treat the parties’ personal property as being divided.
[106] The appellant’s equity in the matrimonial home was determined to be $48,604.22 at the time of separation, after deducting joint debts to that date. We would propose that, if the parties consent, the respondent be ordered to pay this amount to the appellant by way of equalization of net family property, including the appellant’s interest in the matrimonial home, less any amount that has been paid to date by the respondent for equalization under the trial judge’s order. The orders made at trial regarding costs and those made on appeal relating to spousal and child support would be unaffected.
ORDER
[107] Unless the parties consent in writing within 30 days to a different order, an order shall issue as follows:
(1) The matter of equalization of net family property shall be remitted for trial before a judge other than the trial judge. The equalization payment shall be subject to adjustment to credit the appellant for the amount due to him for the buyout of his interest in the matrimonial home, as against the credit due to the respondent for the joint debts assumed by her, in the net amount of $48,604.32 payable to the appellant.
(2) The respondent shall pay to the appellant spousal support in the amount of $10,000 for the years 2013 and 2014.
(3) The appellant shall pay to the respondent arrears of child support in the amount of $3,877, based on the appellant’s income of $18,000 (2013) and $34,525 (2014).
(4) The balance of the trial judge’s order is confirmed.
COSTS
[108] The appellant and counsel for the respondent were also asked during argument for their submissions with respect to costs. Each side requested the sum of $10,000, all inclusive, in the event that they were successful. However, success on the appeal was divided. For that reason, we make no order as to costs.
Heeney R.S.J.
Morawetz R.S.J.
Ellies J.
Released: May 30, 2017
CITATION: Phelps v. Childs, 2017 ONSC 1443
DIVISIONAL COURT FILE NO.: DC 15-2146
DATE: 2017/05/30
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
Heeney R.S.J., Morawetz R.S.J., Ellies J.
RYAN TIMOTHY PHELPS
Appellant
– and –
ZOE MICHELLE JULIA CHILDS
Respondent
REASONS FOR decision
Released: May 30, 2017
[^1]: This is taken from the trial judge’s reasons of May 29, 2015 (para. 11). However, the evidence at trial was that the Respondent received the sum of $22,000. The significance of the disparity relates to the issue of excluded property. The respondent’s position was that she used the December payment to repay in full a loan of $21,000 advanced by her father to purchase the shares, which sum would exceed the amount referred to by the trial judge. However, the trial judge later found that the father was paid back in funds that came from the respondent’s structured settlement (para. 41). Therefore, nothing turns on the discrepancy for the purposes of the appeal.
[^2]: See the appellant’s written trial submissions, at para. 167.
[^3]: There was a small discrepancy with respect to the amount of the car loan, but no issue is taken with this.