Ostapchuk v. Ostapchuk [Indexed as: Ostapchuk v. Ostapchuk]
64 O.R. (3d) 496
[2003] O.J. No. 1733
Docket No. C36950
Court of Appeal for Ontario
Morden, Labrosse and Goudge JJ.A.
May 9, 2003
Family law -- Practice -- Costs -- Trial judge not awarding costs to husband on party and party basis to date of offer to settle and on solicitor-client basis thereafter despite fact that judgment was more favourable to husband than was his offer -- Secrecy associated with creation of debt between husband and his mother made compromise and resolution almost impossible -- Trial judge not erring in ordering husband to pay costs of trial on party and party basis.
Family law -- Property -- Equalization of net family property -- Trial judge not erring in allowing debt owed by husband to his mother to be included in husband's net family property for purposes of equalization.
Family law -- Support -- Child support -- Extraordinary expenses -- Child support should not be deducted from or added to parents' incomes for purpose of determining special or extraordinary expenses under s. 7 of Child Support Guidelines -- Federal Child Support Guidelines, O. Reg. 391/97, s. 7.
The wife appealed the judgment on the grounds that the trial judge erred when she allowed a debt owing by the husband to his mother to be included in the husband's net family property for purposes of equalization and in the calculation of [page497] the parties' incomes for purposes of special or extraordinary expenses for the children under s. 7 of the Federal Child Support Guidelines. The husband cross-appealed on the grounds that the trial judge erred in requiring him to pay 50 per cent of the realty taxes on the matrimonial home between January 1, 1998 and the closing of the sale of the home, and in ordering him to pay the costs of the trial, on a party and party basis, despite his having made an offer to settle which was less favourable to him than the judgment.
Held, the appeal should be allowed in part; the cross-appeal should be dismissed.
The husband's mother unquestionably contributed $120,000 to the acquisition of the parties' matrimonial home. The trial judge's finding that the amount was a loan to the husband rather than a gift was amply supported by the evidence.
The trial judge erred in her calculation of the parties' incomes for purposes of special or extraordinary expenses under s. 7 of the Guidelines. Child support should not be deducted from or added to the parents' incomes for the purpose of determining s. 7 expenses. Section 3(2) of Schedule III of the Guidelines directs that spousal support is to be deducted from the payor's income (and, inferentially, included in the payee's income) in calculating income for determining s. 7 payments. This is in contrast to how income is calculated for the purpose of determining basic child support under the table amount, where spousal support is not included. The express mention of spousal support in calculating s. 7 expenses necessarily implies that child support is purposely excluded from the determination of income for this purpose.
The trial judge reviewed the Minutes of Settlement which the parties signed in a related action and noted that an interim order from July 1999 contained no reference to realty taxes on the parties' jointly-owned matrimonial home. She concluded that, in the absence of a clear indication by either party in their Minutes of Settlement or by the court in the interim order, the taxes were the equal responsibility of both parties between January 1, 1998 and the date of closing. There was no error in this conclusion.
The trial judge did not err in failing to award the husband party-and-party costs to the date of his offer to settle and solicitor-and-client costs thereafter. There are circumstances where a party who has made reasonable attempts to settle and who has recovered a judgment more favourable than his or her offer should not be entitled to the costs of the action. She thought that this was such a case as the husband had to take responsibility for the fact that the secrecy associated with the creation of the debt between his mother and him created a situation where compromise and resolution were almost impossible. There was no reason to interfere with the trial judge's exercise of her discretion in this matter.
APPEAL and CROSS-APPEAL from a judgment of Kitely J., [2001] O.J. No. 3201 (QL) (S.C.J.) in a family law action.
Cases referred to Magee v. Magee (1997), 1997 11187 (SK QB), 159 Sask. R. 223 (Q.B.); Moss v. Moss (1997), 1997 15994 (NL SC), 159 Nfld. & P.E.I.R. 1, 492 A.P.R. 1 (S.C.); Peltz v. Peltz, [2000] O.T.C. 732, [2000] O.J. No. 3778 (QL) (S.C.J.); Prince Edward Island (Director of Maintenance Enforcement) v. Skinner, 2000 PESCTD 25, [2000] P.E.I.J. No. 29 (QL), 2000 PESCID 25 (S.C.T.D.); Whittle v. Clements, [1998] N.J. No. 140 (QL) (U.F.C.) Statutes referred to Courts of Justice Act, R.S.O. 1990, c. C.43, s. 131 Rules and regulations referred to Child Support Guidelines, O. Reg. 391/97, ss. 7, Sched. III, 3(2) Rules of Civil Procedure, R.R.O. 1990, Reg. 194, Rules 49, 57 [page498] Authorities referred to Epstein, P.M."Child Support Guidelines Legislation: An Overview", online: Joel Miller's Family Law Centre http://www.familylawcentre.com (date accessed: 16 April 2003) Payne, J.D., Child Support in Canada, 3rd ed. (Quicklaw, 2001), online: QL (PDCS)
Murray E. Lightman, for respondent. Robert N. Kostyniuk, for appellant.
The judgment of the court was delivered by
[1] LABROSSE J.A.: -- The husband and wife were married on November 1, 1991. They have two children: Anastasia, born June 12, 1993 and Samantha, born March 31, 1995. The parties separated on December 14, 1997 and were divorced on June 29, 1999. They resolved the issues of custody and access before trial, and the remaining issues of equalization of net family property and child and spousal support were tried before Kiteley J.
[2] The wife appeals from the judgment of Kiteley J. on the grounds that the trial judge erred:
(1) when she allowed a debt owing by the husband to his mother to be included in the husband's net family property for purposes of equalization; and
(2) in the calculation of the parties' incomes for purposes of special or extraordinary expenses for the children under s. 7 of the Federal Child Support Guidelines, O. Reg. 391/97.
[3] The husband cross-appeals on the grounds that the trial judge erred:
(1) in requiring him to pay 50 per cent of the realty taxes on the matrimonial home between January 1, 1998 and the closing of the sale of the home; and
(2) on the issue of the costs of the action.
The Debt
[4] With respect to the first ground of appeal, the debt alleged to be owed by the husband to his mother is in the amount of $120,000, which the mother unquestionably contributed to the acquisition of the matrimonial home for the parties. The issue [page499] was whether the amount was a gift or a loan to the husband. The trial judge heard considerable evidence on this issue. In her reasons, she provided a detailed review of the evidence of the parties and other witnesses and found that there was a valid subsisting debt owing by the husband to his mother on valuation date. Consequently, she included the amount of the debt in the calculation of the net family property of the husband. This finding of the trial judge is amply supported by the evidence and there is no basis for this court to interfere.
Section 7 Expenses
[5] The second ground of appeal relates to special or extraordinary expenses for the support of a child that may be ordered under s. 7 of the Guidelines. Section 7(2) provides that these expenses are to be shared by the spouses in proportion to their respective incomes.
[6] For the purpose of the child support payable pursuant to the table amount under the Guidelines, the trial judge determined that the husband's annual income was $39,977.54 and that the child support payable was $557 per month for the two children.
[7] When she addressed the special or extraordinary expenses, the trial judge said at para. 87:
Having found that Svitlana's income is $30,000.00, for purposes of calculating the ratio for payment of the section 7 expenses, Schedule III of the Guidelines directs that the child support is deducted from James' income and added to Svitlana's income. As a result of that calculation, Svitlana's income for the ratio is $36,684.00 and James' income is $33,293.00.
[8] Although both counsel are in agreement, for the purpose of this appeal, that child support should not have been deducted from or added to the parents' incomes for the purpose of determining s. 7 expenses, it may be helpful for this court to pronounce itself on this issue which has to be frequently addressed by trial judges.
[9] The few cases that have considered the issue of the calculation of income for the purpose of determining payment of s. 7 expenses have reached different results. See e.g.: Peltz v. Peltz, [2000] O.T.C. 732, [2000] O.J. No. 3778 (QL) (S.C.J.); Moss v. Moss (1997), 1997 15994 (NL SC), 159 Nfld. & P.E.I.R. 1, 492 A.P.R. 1 (S.C.); Whittle v. Clements, [1998] N.J. No. 140 (QL) (U.F.C.); Magee v. Magee (1997), 1997 11187 (SK QB), 159 Sask. R. 223 (Q.B.); Prince Edward Island (Director of Maintenance Enforcement) v. Skinner, [2000] P.E.I.J. No. 29 (QL), 2000 PESCTD 25 (S.C.T.D.). None of these cases has provided an analysis to explain or justify the particular results that were reached. On the other hand, family law commentators have generally expressed the view that child support is not deducted from or [page500] included in the parents' incomes for the purpose of determining the payment of s. 7 expenses. See, e.g., P.M. Epstein"Child Support Guidelines Legislation: An Overview", online: Joel Miller's Family Law Centre http://www.familylawcentre.com (date accessed: 16 April 2003); J.D. Payne, Child Support in Canada, 3rd ed. (QUICKLAW, 2001), online: QL (PDCS).
[10] The Guidelines do not, as stated by the trial judge, direct that the child support payable by the husband be deducted from his income and added to the income of the wife for the purpose of calculating the ratio for payment of the s. 7 expenses.
[11] On the contrary, Schedule III of the Guidelines is silent on the issue of child support in calculating income for the purpose of determining special or extraordinary expenses under s. 7. However, the Schedule does specifically mention the deduction of spousal support for this purpose. Subsection 3(2) states:
Special or extraordinary expenses
3(2) To calculate income for the purpose of determining an amount under section 7 of these Guidelines, deduct the spousal support paid to the other spouse.
[12] This provision directs that spousal support be deducted from the payor's income (and by implication correspondingly be included in the payee's income) in calculating income for determining s. 7 payments. This is in contrast to how income is calculated for the purpose of determining basic child support under the table amount, where spousal support is not included. The express mention of spousal support in calculating s. 7 expenses necessarily implies that child support is purposely excluded from the determination of income for this purpose. This is a logical distinction given that spousal support goes to a parent's ability to contribute to s. 7 expenses whereas child support does not.
[13] Moreover, it does not follow that the basic child support payment derived from the table amount be separated from s. 7 expenses. Section 7 expenses are merely special or extraordinary expenses that are determined to be additional costs of raising a child that are not incorporated in the table amounts. This is the reason they are characterized as special or extraordinary -- they are outside of the ordinary expenses contemplated by the figures calculated in the table. However, they are still part of child support.
[14] Given that s. 7 expenses are added to the base amount of child support provided for by the table to determine the total amount of child support payable, it does not follow that the base amount should be separated from the s. 7 expenses. Nor does it follow that the amount of child support payable according to the [page501] table should form part of the income of the custodial parent for the purpose of completing the child support determination under s. 7. The inclusion of this income would be particularly problematic given that s. 7 expenses are those that go beyond the ordinary expenses contemplated by the table and therefore should not be indicative of the ability of the recipient of child support to contribute to extraordinary expenses.
[15] Finally, if Parliament had intended for child support payments to be a separate consideration in calculating income for s. 7 expenses, it would have expressly provided for this as it did in the case of spousal support payments.
[16] Section 7 expenses form part of the overall child support determination and should be calculated (when spousal support is not applicable) on the basis of the non-custodial parent's income used to determine the child support payable under the table. By the same token, the parent receiving the support on behalf of the child (not for his or her personal benefit) should not have this amount reflected as part of her own income for the purpose of determining her ability to contribute to the extraordinary expenses of the child. In effect this would be a mischaracterization and, more specifically, an overstatement of the parent's ability to contribute. This would leave open the possibility, as exists in this case, that one spouse would be severely disadvantaged in the determination of the s. 7 expenses.
[17] In my view, counsel were correct in agreeing, at the opening of the hearing of the appeal, that child support should not have been deducted from the husband's income and added to the wife's income for the purpose of determining the payment of s. 7 expenses. Counsel are also in agreement that on the basis of the parties' incomes, subject to minor adjustments, the ratio for payment of the s. 7 special or extraordinary expenses should be 57 per cent for the husband and 43 per cent for the wife.
Property Taxes
[18] In the cross-appeal, the husband questions the disposition by the trial judge of the property taxes on the matrimonial home. The trial judge ordered that the home be sold in accordance with the Minutes of Settlement. The husband argues that the trial judge was in error in ordering him to pay 50 per cent of the property taxes which, he maintains, were properly the responsibility of the wife who was residing in the home with the children of the marriage.
[19] The trial judge reviewed considerable evidence relating to this issue. She noted that the Minutes of Settlement in a related action, executed by the parties on January 29, 1998, referred to [page502] the typical expenses associated with accommodation, except for realty taxes. An interim order dated July 6, 1999 contained no reference to realty taxes. She also noted that both parties remained joint owners of the matrimonial home. She concluded that, in the absence of a clear indication by either party in their Minutes of Settlement or by the court in the interim order, the taxes were the equal responsibility of both parties between January 1, 1998 and the date of closing. I see no error in this conclusion.
[20] There are two other factors which militate against the position of the husband on this issue. Firstly, on January 18, 2002, on a motion by the wife, Chief Justice McMurtry stayed the sale of the matrimonial home ordered by the trial judge pending the hearing of the wife's appeal. Having won that motion, the wife should not be penalized for the delay. Secondly, and more importantly in my view, the husband will share equally in the equity. There is no unfairness in holding him responsible for one-half of the realty taxes. The house should now be sold forthwith.
Costs of Action
[21] The other issue raised by the husband in the cross- appeal relates to the disposition of costs of the action by the trial judge. The trial judge ordered the husband to pay the costs for the four days of trial and one day of costs submissions on a party-and-party basis. The husband argues that the trial judge erred in failing to award him party-and-party costs to January 8, 2001 and solicitor-and-client costs thereafter.
[22] The trial judge noted that the husband had made an offer of settlement in advance of the anticipated trial date and that the judgment was more favourable to the husband than was his offer. She also noted that the wife had made an offer which was delivered minutes before the trial started and that the judgment was "materially less favourable" than was her offer.
[23] The trial judge recognized the importance of parties making early and reasonable offers (as an incentive to the settlement of litigation). She also recognized that there are circumstances where a party who has made reasonable attempts to settle and who has recovered a judgment more favourable than his/her offer should not be entitled to the costs of the action. She thought that this was such a case. In her view, the secrecy associated with the creation of the debt between the husband and his mother created a situation where "compromise and resolution were well nigh impossible. For that the husband must take responsibility."
[24] However, she also found that the wife should have been more amenable to the husband's offer to settle. Although this was a case where the wife should not be punished for having her day [page503] in court when it was the actions of the husband which created the circumstances, she ought not to be rewarded with an order for costs when her offer to settle was made as the trial was scheduled to begin and was less favourable than the judgment. In the context of her reasons, I conclude that the trial judge meant that the wife was not entitled to an order for her full costs.
[25] In these circumstances, as I have said, the trial judge ordered the husband to pay costs for the four days of trial and the day that counsel made submissions with respect to costs, on a party-and-party basis.
[26] In my view, the trial judge considered all the relevant factors in arriving at a determination of costs pursuant to s. 131 of the Courts of Justice Act, R.S.O. 1990, c. C.43 and Rules 49 and 57 [of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194]. Having in mind the wide discretion afforded to trial judges when dealing with costs, I am not persuaded that she improperly exercised her discretion on this issue.
[27] In the result, I would allow the appeal with respect to the s. 7 expenses and order that the proportion of payment be 57 per cent for the husband and 43 per cent for the wife. In all other respects, I would dismiss the appeal. I would dismiss the cross-appeal.
Costs of Appeal and Cross-Appeal
[28] With respect to the costs of the appeal and cross- appeal, success is divided. The major part of the appeal dealt with the $120,000 loan and the husband was successful on that issue. On the other hand, although the issue of the s. 7 expenses was conceded by the husband, this court only became aware of this concession at the beginning of the hearing of the appeal. This is an important and continuing benefit for the wife. In addition, she was successful in having the cross- appeal dismissed. In my view, success was equally divided and I would make no order as to costs.
Appeal allowed in part; cross-appeal dismissed.