Court File and Parties

COURT FILE NO.: 32777/10 DATE: 2016-09-13 ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN: Delia Joan Berta Applicant – and – Raymond Louis Berta Respondent

Counsel: Douglas Quirt, Counsel for the Applicant Peter M. Callahan, Counsel for the Respondent

Heard: Written Submissions Received

Reconsideration Reasons Harper J.

Issues

[1] These reasons are a reconsideration of the issue of spousal support as a result of a direction of the Court of Appeal of Ontario. This represents uncharted waters as there has only been one other case that have been brought to my attention that deals with reconsideration by a trial judge of an issue that he or she had been found by the Court of Appeal to have erred in the original reasons.

[2] In Leveque v Leveque, 54 BCLR 164, [1983] BCJ No. 2213 (QL), the B.C. Court of Appeal heard and decided an appeal concerning access by a father to his children. The original decision granted access to the parties’ children on a shared basis. The facts of the case deal with an allegation of sexual abuse by an adopted daughter against her mother’s partner. Looking at the available evidence, as to whether the partner did, indeed, sexually abuse the daughter, the Court of Appeal concluded that it could not effectively conclude on the issue: “[a] review of all the evidence by us would not be productive because we do not have any findings by the judge as to the credibility of the witness, and those findings are of great importance in a case of this type.”

[3] The father in Leveque, who was accused of sexual abuse, appealed a restrictive child custody order against him. While the specific facts of the abuse are not as relevant to the current issue, the Court of Appeal’s conclusion is:

In the circumstances, I think the question of access must be remitted to the trial judge for reconsideration. He will not only have the benefit of the evidence he has already heard, but he can hear evidence from the persons who have been involved during the last year in the supervised access situation. In the light of all that evidence he will be in a better position to decide what is now in the best interest of these children, and to give clear reasons for the order which he makes.

Though a case from British Columbia, this is almost the exact wording that the Ontario Court of Appeal used in its Berta v Berta decision. It is also a remitting of a case to reconsider the same evidence as the original trial decision.

[4] The main difference is that I am not considering new evidence following the trial. In Leveque, updated evidence had to be considered as the court was to determine what access might be in the best interest of the child at that point in time, given the original evidence, findings and updated evidence.

The Direction of the Court of Appeal

[5] In Berta v. Berta, 2015 ONCA 918, 128 OR (3d) 730, the Ontario Court of Appeal stated, commencing at para. [83]:

[83] On the disposition of this appeal that I propose, the trial judge’s spousal support award must be set aside because the basis for his determination of the Wife’s annual income for support purposes is unclear, as is any justification for the amount of annual income imputed to the Wife.

[84] At the appeal hearing, the parties took the position that if this court set aside the trial judge’s spousal support award based on an error by the trial judge in imputing annual income to the Wife, this court should substitute its own opinion regarding the appropriate quantum of the Wife’s annual income for support purposes. In the alternative, the Husband argued that the issue should be returned to the trial judge for clarification.

[85] This court does not have the benefit of meaningful reasons from the trial judge concerning his income imputation to the Wife, a key component of his spousal support analysis. Nor has this court been provided with any information regarding the Husband’s and the Wife’s post-2012 annual incomes. In these circumstances, in my view, it is inappropriate for this court to attempt to ascertain the appropriate quantum of the Wife’s periodic spousal support.

[86] Accordingly, I would order that the issue of the proper quantum of the Wife’s annual income for support purposes, and the consequences, if any, of that determination on the amount of periodic spousal support to be paid to her by the Husband, be remitted to the trial judge for reconsideration. In the interim, unless otherwise agreed by the parties and without prejudice to the trial judge’s reconsideration of the issue, the Husband shall pay monthly spousal support to the Wife commencing January 1, 2016 in the same monthly amount as applied in 2011 and 2012. Depending on the outcome of the trial judge’s reconsideration of spousal support, the Husband may be credited for any overpayment by him of periodic spousal support from and after January 1, 2016, as the trial judge may direct.

[6] Subsequent to the release of the above decision, counsel acting for the Appellant, Erin Franks, her trial counsel, Douglas Quirt, and the Respondent’s counsel, Peter Callahan, filed written submissions with respect to the reconsideration ordered by the Court of Appeal. Mr. Quirt’s filing time was extended due to health challenges. Unfortunately, Mr. Quirt passed away shortly after filing his submissions. Mr. Franks advised the court that he was no longer retained by Appellant, however, he was assisting her to move this matter forward until another counsel could be retained.

The Positions of the Parties

Joan Berta (Applicant)

[7] Joan Berta, the applicant in this matter, made written submissions on the quantum of her income for support purposes, the appropriate amount of support to be ordered and the cost award.

[8] Rooted in the Court of Appeal’s reasoning, Joan Berta appealed the amount of period spousal support awarded at trial. It was her submission that the amount awarded rested on incorrect and outdated calculations of the parties’ respective incomes. She specifically points out the Court of Appeal’s question regarding the attribution of income for the purpose of calculating future and indefinite spousal support.

[9] Regarding the Court of Appeal’s direction on the parameters for the determination of Joan Berta’s income and support entitlement, her position is as follows: “This court has already set proper parameters, and the only question is the proper “input” of her income and the resulting support entitlement.”

[10] Following the lead from the Court of Appeal, Joan Berta included details of her post-2012 income information in her submitted materials. She has called on her husband to do the same.

[11] Outlining the proper quantum for determining her income, Joan Berta concludes that the following should be considered:

• A reasonable return on capital supported by actual evidence from Ray Berta;
• Other pension and benefits income (employment income, Old Age Security Pension, CPP and US benefits, Stelco pension) totalling $67,545;
• Income from her RRIF at a value of $14,774; and
• Interest and rental income of $20,400

[12] In sum, Joan Berta asserts that her income for spousal support purposes is as follows:

• 2011: $94,800;
• 2012: $84,878;
• 2013: $127,361;
• 2014: $82,621;
• 2015: $90,233

[13] Based on these numbers, she asserts that the appropriate range of indefinite spousal support is $17,000 to $23,000 per month.

Capital Gains and ACCE Shares

[14] Joan Berta claims that capital gains and registered retirement savings plan income are subject to adjustment, as described in Schedule III of the Child Support Guidelines (Guidelines), and they therefore may be excluded from the calculation of income if their inclusion will not lead to a fair determination of income. She submits that the amount she realized, as a result of selling her ACCE shares to Ray Berta, should not be included in her income calculation. This was a one-time sale, she converted the value of her shares to cash upon sale, and therefore it is not an accurate portrayal of her income on an ongoing basis.

The Cost Award

[15] Joan Berta concludes that she should not owe her husband costs on a full indemnity basis. Picking up on the Court of Appeal’s reasoning, her husband’s position at trial was that she was not entitled to any spousal support. This position did not prevail, and therefore she ought to be entitled to 75% of her partial indemnity costs, at a value of $365,218.69.

Ray Berta (Respondent)

[16] Ray Berta, the respondent in this matter, made written submissions on the quantum of Joan Berta’s income for support purposes, and the cost award.

The Quantum of Joan Berta’s Income for Support Purposes

[17] Ray Berta submitted evidence that from 2010 to 2013, Joan Berta’s income breakdown is as follows:

• 2010: total $72,392.10;
• 2011: $83,489.51;
• 2012: $435,309.67 (drastic increase attributable to $350,432 in taxable capital gains from sale of ACCE shares to Ray Berta);
• 2013: $484,877.67

[18] Ray Berta’s position strongly rests on the proposition that Joan Berta’s capital gains income, arising from the sale of her shares in ACCE, properly form part of her income for determining support. Ray Berta claims that this position is supported by the law, specifically section 16 of the Federal Child Support Guidelines (Federal Guidelines), which, as per Schedule III, directs that a court should determine a parent’s annual income using the entire capital gain realized on a parent’s income, and not just the taxable portion. As this is a major focus of Mr. Berta’s argument, I will outline the case law he uses to support this conclusion:

• Schick v Schick, 2008 ABCA 196 – the Alberta Court of Appeal upheld a decision by the trial judge that all available incomes should be considered for support during the relevant years because this is keeping with the wording and purpose of the Guidelines.
• Arnold v Washburn, [2001], 57 O.R. (3d) 287 - The Ontario Court of Appeal noted that without direct inclusion of monies received from the sale of shares, there remained an evident “imbalance of power”.
• Droit de la famille – 123147, 2012 QCCA 1966 – the Quebec Court of Appeal found that the motions judge did not err in including a $1.9 million dividend in the husband’s income for the purposes of child support.
• Phillips v Delaney, [2001] PEIJ No. 86 - the trial judge at the Prince Edward Island Supreme Court imputed income from a father’s capital gains income because, if properly invested, it could have generated a substantial return which would have enhanced the father’s ability to meet child support obligations.

US Steel Pension

[19] Ray Berta also claims that Joan’s US Steel pension should be included in her income for support purposes. Ray Berta claims that since his wife worked at Stelco from 1963 to 1993, and the parties were not married until 1982, the majority of her pension was not equalized and should therefore be included in her income calculation.

Joan Berta’s RRIF & OAS

[20] Ray Berta claims that on the valuation date (March 26, 2010), his wife’s RRIF was worth $284,013.42. On or about October 30, 2013, it was worth $341,681.20. This increase was not the subject of equalization, and Ray Berta claims it should have been.

[21] Ray Berta also claims that Joan Berta’s OAS should have been included in the valuation claim.

Joan Berta’s Need for Support, and Ray Berta’s Ability to Pay

[22] A significant aspect of Ray Berta’s argument is that Joan Berta does not exhibit a need for spousal support. In making this determination, Ray Berta makes the following conclusions:

• Joan Berta receives a pension through her former employer, Stelco, as well as the Canada Pension Plan. These total approximately $4,974.00 per month;
• She also receives full extended healthcare benefits through Stelco;
• She carried on a consulting business from 1994 to 2003;
• As of the date of separation, she had funds invested in an RRIF totalling $380,673.71;
• The 2011 endorsement from Justice Goodman (the “Goodman order”) concluded that Joan Berta is capable of being self-supporting from various sources, and imputed an income to her totalling $227,300. This order was not appealed;
• Since the Goodman order, Joan Berta has sold her shares in ACCE for a price of $2,200,000 (of which she has received the entire thing);
• Joan Berta also received $350,000 from the sale of their matrimonial home in July 2011.
• At the date of separation, Joan Berta had savings of $440,000.
• Joan Berta, despite claiming a need for support, was able to lend her daughter $200,000, and she is receiving a return on this investment at 3%, which Ray Berta estimates to total a yearly return of $6000 (this was not on her Sworn Financial Statement).
• Joan Berta owns a condominium in Florida which she does not rent out when unused.
• Joan Berta owns a rental company with her daughter in London, Ontario. Each of the three students who rent the property pays $400 per month (the income from this property was not on her Sworn Financial Statement).

[23] Finally, Ray Berta claims that he has incurred significant debt in order to purchase Joan Berta’s shares in ACCE, and therefore he cannot pay support. He receives a Canada Pension Plan benefit, and Social Security benefits from the U.S. government, which total $1,519. He is in poor health, and has found it increasingly difficult to work and wants to retire.

Court of Appeal on Capital Gains and Imputed Income

[24] The Court of Appeal’s decision focuses on the award of indefinite spousal support and Joan Berta’s capital gains. The Court of Appeal notes that Joan Berta could, at the most, have been expected to have an asset portfolio of $2.2 million from the sale of her ACCE shares, plus $380,000 in her RRIF, $350,000 from the sale of the matrimonial home, and an additional $60,000 in savings, totalling an asset portfolio of $2.99 million. Relying on Boston v Boston, 2001 SCC 43, [2001] 2 S.C.R. 413, the Court of Appeal notes that “if a payee spouse receives significant assets as part of equalization and does not invest those assets in an attempt to produce an income, the court should impute an income…based on what income those assets could reasonably produce if invested.” Using a rough calculation with a “generous” interest rate of 6% return on her investments, the Court of Appeal projected that Joan Berta, at most, would have an annual income of $282,119. The Court questions the imputation of $484,356 annual income to Joan Berta.

[25] Though the Spousal Support Advisory Guidelines refer to imputing income, they do not expressly provide how this should be done. Instead, they adopt the methodology employed by section 19 of the Federal Child Support Guidelines (Federal Guidelines). A survey of recent case law does not provide a clear picture as to how imputed income is actually measured. Rather, it appears courts consider the imputing of income on a case-by-case basis. Any reconsideration of Joan Berta’s income may now take into consideration her sale of ACCE shares, and the capital gains she realized from that, as well as personal investments and newly divulged rental income.

[26] The court of Appeal did not have any evidence of the post-trial financial situation of the parties. I do not have this information other than what Joan Berta should receive for her sale of shares in ACCE over time. The parties agreed that I should give by reconsideration reasons without considering new evidence. The parties will then consider what to do once my reconsideration decision has been released.

[27] Determining when it is appropriate to include capital as part of income for support has received no guidance from any Court of Appeal decision. As Gordon RSJ stated in the recent case of Carmichael v Carmichael, 2016 ONSC 4336:

I am also satisfied that the issues involved in this appeal are matters of sufficient importance that leave to appeal ought to be granted. In that regard, I have been referred to no appellate authority which defines the circumstances, if any, under which it is appropriate to include capital receipts as income for the purposes of calculating child support. It is a situation which is not confined to these parties, and an issue upon which the direction of an appellate court would be of benefit to other family law litigants and their counsel.

[28] In Bensky v. Bensky, 2012 ONSC 4029, Penny J. stated at paragraph 42:

[42] I do not think, however, for interim support purposes, that it is appropriate to exclude all capital gains, since the earnings history, again, reflects capital gains realized by the respondent in 9 out of the last 11 years. In my view, the realization of capital gains is simply one feature of the way in which the respondent realizes financial benefit out of the development projects he invests in. To the extent the potential for “double dipping” is a problem, which can be accounted for at trial.

[29] In my view, the inclusion of capital is a case by case analysis. If there is a history of capital gains realization as in Bensky, it is a proper consideration. It should rarely be considered when there is a onetime capital sale as in this case, even when the proceeds are paid periodically over time.

[30] The capital receipts by Joan Berta from the sale of her shares in ACCE should only be considered for what they can reasonably yield as income if invested in a reasonable manner.

[31] I find that the fairest approach is to calculate Joan’s income based on what income her capital resources can reasonably produce if invested properly. Together with her various pension income. I adopt the calculation of the Court of Appeal in their decision in this case. Using a rough calculation with a “generous” interest rate of 6% return on her investments, the Court of Appeal projected that Joan Berta, at most, would have an annual income of $282,119. I agree and accept that amount as a fair amount of income to impute to Joan Berta.

Lump Sum or Periodic

[32] In Davis v. Crawford, 2011 ONCA 294; 106 OR (3d) 221, the Ontario Court of Appeal commented on some of the considerations a court should look to when determining if a lump sum award is appropriate. Both the Family Law Act, R.S.O. 1990, c. F.3 and the Divorce Act, R.S.C. 1985, c. 3 (2nd Supp.) contain provisions conferring a broad discretion on judges to make an award of periodic or lump sum spousal support, or to make an award comprising both forms of support.

[53] Sections 34(1)(a) and (b) of the Family Law Act provide as follows:

34(1) In an application under section 33, the court may make an interim or final order,

(a) requiring that an amount be paid periodically, whether annually or otherwise and whether for an indefinite or limited period, or until the happening of a specified event; [and]

(b) requiring that a lump sum be paid or held in trust. (Emphasis added)

[54] Section 15.2(1) of the Divorce Act reads as follows:

15.2(1) A court of competent jurisdiction may, on application by either or both spouses, make an order requiring a spouse to secure or pay, or to secure and pay, such lump sum or periodic sums, or such lump sum and periodic sums, as the court thinks reasonable for the support of the other spouse. (Emphasis added) [page232]

[55] Both Acts include sections addressing the purposes of an order for spousal support and the factors to be taken into account in making such an award: see Appendix 'A'.

[56] Specifically, s. 33(8) the Family Law Act provides that the purposes of spousal support are to

(a) recognize the spouse's contribution to the relationship and the economic consequences of the relationship for the spouse;

(b) share the economic burden of child support equitably;

(c) make fair provision to assist the spouse to become able to contribute to his or her own support; and

(d) relieve financial hardship, if this has not been done by orders under Parts I (Family Property) and II (Matrimonial Home).

[57] None of these sections contains restrictions of the type set out in Mannarino.

[58] Had Parliament or the legislature intended that the discretion to make an award of lump sum spousal support to a married or an unmarried spouse be as highly constrained as the appellant argues is prescribed in Mannarino, those bodies surely would have said so. Moreover, we can find nothing in the legislative history relating to either Act, or to predecessor Acts, suggesting such an intention.

[33] The Court of Appeal went on to state commencing at paragraph 70:

[70] As we have said, we do not endorse the submission that lump sum spousal support awards must be limited to "very unusual circumstances" as a matter of principle. Nonetheless, we agree that most spousal support orders will be in the form of periodic payments. To a large extent, this is for four very practical reasons.

[71] First, in many instances, moneys will simply not be available to fund a lump sum support award either to take the place of, or to supplement, an award of periodic support. Instead, support will be paid from one spouse's income, the only available source for support payments, and it will be paid to finance the ongoing needs of the other spouse, which will generally be of a periodic rather than lump sum character.

[72] Second, for married couples, the court will have determined already the amount to be paid to equalize the value of the spouses' net family properties: see s. 5, Family Law Act. In many circumstances, this payment will obviate any requirements a dependent spouse may have for transitional capital.

[73] Third, in many cases, there will be no considerations favouring a lump sum award from the perspective of either spouse.

[74] Fourth, in at least some cases where there are considerations favouring a lump sum award, the general exigencies of life, including the possibility that the parties' means and needs will change, will outweigh the considerations favouring a lump sum award.

[34] In the current case, the evidence indicated that the parties had already overused the company`s resources, and had fallen out of favour with the bank and the banking covenants. In addition, Raymond had to borrow substantial sums of money in order to pay Joan for her share in ACCE. There is no evidence that he could access any further sums of money in order to satisfy and lump sum award.

[35] A further consideration is the uncertainty of Raymond’s health. At the time of trial he was meeting his challenges with his cancer diagnosis. However, the court is not in a position to predict what will happen in the future with respect to his health and his ability to continue to earn what he was found to be earning at the time of trial.

[36] Under the circumstances, it is my view that a lump sum support award is not appropriate. I expressed in my original reasons that Joan was entitled to period support on a consideration of the contextualized needs of the parties. They built a life in their 20-year marriage that set high expectations with respect to their standard of living. Although they took it to the limit of what they could draw from the company, I am of the view that given their reasonably high standard of living, they should each be entitled to a standard that is fair and relative to the other. That does not mean equality; rather it means relative and fair. Raymond is continuing to work at the company and Joan chose to receive her share of the company’s value. The Court of Appeal did not disturb my findings relative to the income of Ray Berta. The Court stated, commencing at paragraph 47:

[47] The Wife submits that, properly calculated, the Husband’s income in 2011 was $921,896.30, rather than $717,789 as posited by Mr. Ranot. Adjusting for the 2011 understatement yields $712,141.10 average annual income for the three-year period ending 2012. This amount, the Wife says, should have been used to determine the amount of spousal support to be paid by the Husband.

[48] I would reject the Wife’s challenge to the trial judge’s ruling on the Husband’s annual income for support purposes. In my opinion, based on the evidentiary record before him, it was open to the trial judge to accept and rely on Mr. Ranot’s calculations of the Husband’s annual income during 2010 to 2012.

[49] Mr. Ranot testified that the Husband realized the following income: 2010 - $620,472; 2011 - $717,789; and 2012 - $594,055. The trial judge accepted this evidence. He held, at para. 75: I accept Mr. Ranot’s opinion as to the available income of [the Husband] for support purposes. It represents in my view the fairest and most realistic approach to the determination of income available for support.

[37] At trial I found that the appropriate level of income for Raymond Berta was the average of the last three years income at the time of trial. His average was $644,172.

[38] 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%. This amount should be adjusted back to the date of my original reasons, August 20, 2014, with credit given for any amounts paid to date.

COSTS

[38] 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 no use the term bad faith, my findings describe conduct that amounts to bad faith.

[39] 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.

[40] 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.

[41] As a result of the above factors, Joan shall pay costs to Ray in the total amount of $322,125.70.

Released: September 13, 2016 Harper, J.

BETWEEN: Delia Joan Berta Applicant – and – Raymond Louis Berta Respondent

Released: September 13, 2016