COURT OF APPEAL FOR ONTARIO

CITATION: Ludmer v. Ludmer, 2014 ONCA 827

DATE: 20141121

DOCKET: C56795

Blair, Juriansz and Epstein JJ.A.

BETWEEN

Lisa Ludmer

Applicant (Respondent)

and

Brian Ludmer

Respondent (Appellant)

and

Gary Spira

Third Party (Respondent)

Gary S. Joseph and Rebecca Winninger, for the appellant

Lisa Ludmer, acting in person

Rebecca Grosz, for the third party respondent

Heard: October 21, 2014

On appeal from the order of Justice Michael A. Penny of the Superior Court of Justice, dated February 11, 2013, with reasons reported at 2013 ONSC 784, and a related costs order dated August 20, 2013.

R. A. Blair J.A.:

Background

[1] After nearly 20 years of marriage, Lisa and Brian Ludmer separated. There are two children of the marriage, both adults and at the time of trial, both attending university.

[2] Commendably, they agreed upon issues relating to custody and access, by way of a joint parenting plan. However, in all respects relating to the financial and property issues arising out of their separation they have engaged in scorched-earth litigation warfare. Each accuses the other of having “litigated with impunity”.

[3] By all accounts the Ludmers are able individuals. During their marriage, they enjoyed a relatively upper middle-class lifestyle in North Toronto. Mr. Ludmer worked hard as a corporate and securities lawyer, rising through the ranks to partner in three Toronto law firms. His practice declined, however, and at the end of 2004 he was let go. In 2005 he re-commenced practice as a sole practitioner, and since then has re-invented himself as a successful family law lawyer. Ms. Ludmer worked as a placement consultant and recruiter at various personnel placement firms and on her own with some interruption for her child-rearing responsibilities when the children were young. After the separation, she began, once again, to work outside the home.

The Family Law Act and Support Claims (“The Ludmer action”)

[4] The claims as between Mr. Ludmer and Ms. Ludmer revolved around the financial and property issues arising out of their marriage, including child and spousal support and the equalization of family property. There were many interlocutory and other proceedings prior to trial. One involved a dispute in the province of Québec over disclosure of information relating to a family trust established by Mr. Ludmer’s father of which Mr. Ludmer is a beneficiary. That dispute made its way through the Superior Court of Québec, the Court of Appeal of Québec, and an application for leave to appeal to the Supreme Court of Canada.

[5] The trial of the Ludmer action finally took place over 13 days in October and November 2012, before Penny J. On February 11, 2013, he released a thorough and carefully reasoned 51-page decision. Mr. Ludmer was successful in some respects, Ms. Ludmer in others. On August 20, 2013, after hearing submissions, the trial judge ordered that each party should bear their own costs.

The Spira Action

[6] Penny J. also dealt with a separate proceeding commenced by Mr. Ludmer against a former neighbour, Gary Spira. This proceeding (“the Spira action”) was initially a civil claim for invasion of privacy, intentional infliction of mental distress, and for injunctive relief under s. 35 of the Children’s Law Reform Act, R.S.O. 1990, c. C.12, (“the CLRA”) essentially on the basis that Mr. Spira was an officious intermeddler in the dispute between the Ludmers. The claim for injunctive relief was not actively pursued after Mr. Spira ceased his interventions. These three claims were ultimately dismissed in the civil context. In 2008, the appellant added these claims to his family law proceedings and they were heard at the same time.

[7] The substantive complaints in the Spira action were two-fold: (i) that Mr. Spira had interfered in Mr. Ludmer’s relationship with his children and was blindly aligned with Ms. Ludmer in a campaign to do so; and (ii) that Mr. Spira had invaded Mr. Ludmer’s privacy by intercepting and reading his private, and in some cases privileged, electronic communications and forwarding them to Ms. Ludmer’s lawyers. The trial judge dismissed these claims and awarded costs of $125,000 plus HST and disbursements of $5,223.01.

Analysis

The Ludmer Action

[8] For purposes of the appeal the main financial and property issues resolved at trial were:

(a) the validity and enforceability of a marriage contract entered into by the Ludmers following their marriage;

(b) ownership of the matrimonial home;

(c) equalization of family property and excluded property in that context; and

(d) four issues relating to support:

(i) determination of the parties’ income;

(ii) child support;

(iii) spousal support; and

(iv) s. 7 expenses.

[9] Mr. Ludmer was successful in establishing that the marriage contract was valid and enforceable and, accordingly, that his interest in the family trust was not to be included in the equalization payment calculation. This was a significant outcome for him: we are advised that his contingent interest in the trust is approximately $6 to $8 million. An additional benefit of this finding was that Mr. Ludmer had a positive balance of approximately $270,000 by way of equalization.

[10] At the same time, however, Mr. Ludmer was unsuccessful in his claim to an 80 per cent ownership interest in the matrimonial home – the trial judge found the couple owned it equally – and was required to pay Ms. Ludmer the sum of $244,500 with respect to the post-separation increase in its market value. He was successful in excluding certain loans made by his father from his income for support purposes, but was unsuccessful in sustaining his net income as claimed as a result of the trial judge’s decision not to accept his business deductions entirely for that purpose. He was required to pay arrears of child support and a lump sum payment to Ms. Ludmer in the amount of $432,000, on account of spousal support.

[11] When all of the various claims were set off against each other, Mr. Ludmer was required to pay Ms. Ludmer a net amount of $194,434.

[12] This appeal concerns the issues on which Mr. Ludmer was unsuccessful and the findings made against him. On his behalf, Mr. Joseph raises many grounds of appeal. He argues that the trial judge erred:

a) in calculating the parties’ income (by failing to accept Mr. Ludmer’s business expenses for the purposes of spousal support, and by failing to include the proceeds of both parties’ RRSPs in income for child support purposes);

b) in determining spousal support on both a compensatory and needs basis;

c) in failing to adjust his lump sum spousal support award for tax consequences, present value discounting, and future contingencies;

d) in failing to deduct spousal support from his income for the purpose of allocating s. 7 expenses;

e) in allocating all of the 2005 s. 7 expenses to Mr. Ludmer;

f) in ordering the parties to bear their own costs; and

g) in failing to determine previous motion costs that had been deferred to the trial judge.

[13] Ms. Ludmer concedes ground (d) above. Section 3.1 of Schedule III of the Federal Child Support Guidelines, SOR/97-175 (“the Guidelines”), provides that spousal support payable is to be deducted from the payor’s income for the purposes of the s. 7 calculation. The parties agree that this correction increases the amount that Ms. Ludmer owes to Mr. Ludmer for her contribution to s. 7 expenses by $38,096.36. This reduces the net amount owing by Mr. Ludmer to Ms. Ludmer from $194,434 to $156,337.64. The judgment below will be varied accordingly.

[14] I otherwise reject the appellant’s grounds for appeal. For the most part they involve an attack on the trial judge’s findings of fact, all of which were amply supported on the record. It is well established that the standard of review in family law litigation promotes finality and recognizes the importance of the appreciation of the facts by the trial judge. An appeal court may intervene only when there is a material error, a serious misapprehension of the evidence, or an error in law.

Business Expenses Deductions

[15] Mr. Ludmer led evidence from his accountant to establish that the business deductions claimed for his one-person law practice were proper for income tax purposes. No one contests that. The trial judge concluded – correctly – however, that “[t]he fact that a business expense is ‘legitimate’ for tax purposes does not mean that the same deduction is reasonable for support purposes”.

[16] Mr. Joseph accepts this general legal proposition, but argues that the trial judge erred in arbitrarily arriving at a 50 per cent threshold for business expenses in relation to gross income. I do not agree.

[17] Mr. Ludmer argued at trial that his expenses were high because he was required to spend larger amounts on publications, technology, secretarial staff and paralegal staff, in order to promote himself and to build his new practice. The trial judge accepted this argument for the early years. He concluded, however, that “once [Mr. Ludmer’s] practice was up and running and generating substantial revenues starting in 2009, closer scrutiny [was] warranted”.

[18] In the years 2009, 2010, and 2011, Mr. Ludmer claimed that his business expenses, as a percentage of gross professional income, were 66.18 per cent, 56.99 per cent, and 78.42 per cent, respectively. The trial judge determined that to allow the full amount of Mr. Ludmer’s claim for home office, legal, vehicle, meals, entertainment, and, particularly, a 10 per cent of gross revenue deduction for expenditures on publications to sustain a one-person operation, was unreasonable for support purposes. It was not a fair barometer – on a common sense basis – of “[the] income level that fairly and reasonably reflect[ed] the compensation available to [Mr. Ludmer] to pay support” (at para. 157).

[19] Determining child and spousal support is not an exact science. The trial judge lived with this case through 13 days of trial. Indeed, he had had prior exposure to the litigation through various interlocutory proceedings. He was well aware of the dynamics of the litigation, the relationship between the Ludmers, and the particulars of their lifestyle. In the end, he concluded that “the fairest and simplest expedient in these circumstances [was] simply to find that [Mr. Ludmer’s] business expenses, for support purposes, cannot reasonably [exceed] 50 per cent of gross revenue” (at para. 159).

[20] In my view, this approach was open to the trial judge in the circumstances, and I see no basis for interfering with it.

RRSPs

[21] In 2007 and 2008 each party cashed in RRSPs – Ms. Ludmer in the total amount of $347,057, and Mr. Ludmer in the total amount of $181,964. Clearly, the inclusion of these amounts in income would have favoured Mr. Ludmer in the calculation of child support. The trial judge did not do so.

[22] This Court has held that RRSP income is “presumptively part of a spouse’s income for child support purposes.” That is because section s. 16 of the Guidelines provides that a person’s annual income for child support purposes is determined using the sources of income set out under the heading “Total income” on the T1 tax form. RRSP income is included as part of “Total income” on the T1 tax form: see Fraser v. Fraser, 2013 ONCA 715, 40 R.F.L. (7th) 311, at para. 97.

[23] The inclusion of RRSP proceeds is not mandatory, however, and the court has the discretion in appropriate circumstances to do otherwise. Section 17(1) of the Guidelines provides this flexibility:

If the court is of the opinion that the determination of a spouse’s annual income under section 16 would not be the fairest determination of that income, the court may have regard to the spouse’s income over the last three years and determine an amount that is fair and reasonable in light of any pattern of income, fluctuation in income or receipt of a non-recurring amount during those years. [Emphasis added.]

[24] Here, the trial judge excluded both parties’ RRSP proceeds from the calculation of their income for support purposes on the basis that they were “non-repeating encroachments on capital”. Ms. Ludmer’s financial statement indicated that she used her proceeds primarily to finance this costly litigation, not to enhance her lifestyle.

[25] The trial judge did not state specifically that he was applying the analysis under ss. 16 and 17 of the Guidelines when arriving at this decision. However, his reasons show that he was alive to the need to arrive at income levels that “fairly reflected” the financial capacities of the spouses for the purpose of support. In short, his reasons show that, in his view, including the RRSP proceeds in the parties’ incomes “would not be the fairest determination of [the spouses’ incomes]” for support purposes, and that in excluding them, he was arriving at an amount that was “fair and reasonable in light of any pattern of income, fluctuation in income or receipt of a non-recurring amount”.

[26] I see no error in his decision to exclude the RRSP proceeds from income.

Spousal Support

[27] Similarly, I see no error in the trial judge’s decision to award spousal support on both compensatory and needs-based grounds. He considered and applied the relevant law in this respect, and made findings of fact that were supported on the record.

[28] Mr. Ludmer argues that Ms. Ludmer was not entitled to any spousal support. I do not agree.

[29] It was open to the trial judge to find, as he did, that Ms. Ludmer “was financially disadvantaged, at a personal level, by the allocation of roles during the marriage,” that this affected her consulting business, and that she was “unlikely to be able to replicate on her own” the standard of living that the “complete merger of [their] economic lifestyles” had enabled the Ludmers to enjoy. This was sufficient, in my opinion, to justify a “compensatory claim” component in the spousal support award.

[30] More generally – as he was required to do – the trial judge addressed the various factors relating to “the condition, means, needs and other circumstances of each spouse” in determining whether Ms. Ludmer was entitled to spousal support and, if so, the quantum to be awarded: Divorce Act, R.S.C. 1985, c. 3 (2nd Supp.), s. 15.2(4). He summarized his conclusions, at para. 249 of his reasons, as follows:

With respect to the specific monthly amount of support, I have considered the condition, means, needs and other circumstances of each spouse, the Guideline amount, the result of the equalization calculation and the distribution of property between the spouses, the age and stage of the applicant, the ages and stages of the children, the work histories of the parties, the length of the marriage, the functions performed by each spouse during the marriage, the economic disadvantages to the applicant resulting from the marriage breakdown and the promotion of the applicant’s self-sufficiency.

[31] The record supports that he did just that.

Lump Sum Adjustment

[32] At the request of Mr. Ludmer’s counsel, the trial judge made a lump sum award for spousal support. His lump sum award of $432,000 represented the total of the monthly and annual support amounts that he had found to be payable for the years 2008 through 2015 – the 8-year time-limited period for support that he had concluded was reasonable.

[33] Mr. Ludmer objects because the trial judge did not adjust the $432,000 amount for tax consequences, present value considerations, and future contingencies. The trial judge recognized that there was support in the authorities for adjusting a lump sum representing future support payments for such factors. However, he concluded that in the circumstances of this case, such an adjustment was not needed. At para. 257 of his reasons he stated:

In this case, I do not think any adjustment is necessary. The period in question is relatively short. The lump sum I have awarded was determined based on my discretion taking into account a wide range of factors, not least of which [were] the consequences for the applicant of equalization and property division in this case. Five of the eight years have already gone by. Had there been discounting on account of taxes, the amount of support awarded would have been proportionately higher.

[34] This conclusion was reasonable in the circumstances, in my view.

Section 7 Expenses

[35] In varying annual amounts from 2005 to 2012, Mr. Ludmer paid a total of $606,577.12 for children’s expenses such as their Hebrew day school, a nanny, Kyle’s hockey, post-secondary school, and summer camp. It is not contested that these were appropriate special or extraordinary expenses under s. 7 of the Guidelines in accordance with the parties’ lifestyle prior to separation or that Ms. Ludmer paid nothing towards them and, indeed, acquiesced in them for the most part.

[36] Recognizing that s. 7 expenses are generally to be shared by parents in proportion to their incomes, but that he had the discretion to decide otherwise, the trial judge arrived at a calculation that required Ms. Ludmer to pay Mr. Ludmer a total of $181,790. As noted above, Ms. Ludmer concedes that the trial judge erred in failing to take into account support payments ordered in calculating these payments and that the appropriate amount owing by her is $219,886.36.

[37] The trial judge did not allocate any of the s. 7 expenses for the year 2005 – $84,751.97 – to Ms. Ludmer, however. Mr. Ludmer argues he erred in that respect.

[38] Mr. Ludmer had no income in 2005. He funded the s. 7 expenses through loans made to him by his father. For reasons that are not germane to the appeal, the trial judge concluded that the loans received would not form part of Mr. Ludmer’s income for support purposes. He took a different view of them for s. 7 purposes, however, rejecting the argument that the principle “gifts are not income” was dispositive of the s. 7 issue as well.

[39] In the trial judge’s view, s. 7 expenses of almost $85,000 in a year when Mr. Ludmer had zero income (and Ms. Ludmer only $66,809) were simply not reasonable when “this couple could not possibly have afforded [them] on the basis of their own incomes”. The fact that the expenses were funded entirely through family assistance opened up the issue of apportionment and enabled the trial judge to look beyond the parties’ respective incomes. Requiring Ms. Ludmer to reimburse Mr. Ludmer for those payments, in the circumstances, was not appropriate.

[40] In my view, it was open to the trial judge to come to this conclusion. In any event, the amount in issue would not be Ms. Ludmer’s share of $84,751.97. Because the expenses were funded through a loan, the amount in question would only be her share of the interest on the amount of the loan for that year. In the overall balancing of the financial issues between the parties, this would be a relatively insignificant amount.

The Spira Action

The Claim under Section 35 of the CLRA

[41] There is no merit in the appeal respecting the Spira action.

[42] Since Frame v. Smith, 1987 CanLII 74 (SCC), [1987] 2 S.C.R. 99, it has been clearthat no tort action exists for wrongful interference with access rights. The remedy against such interference is now governed by s. 35 of the CLRA, which provides for relief by way of a restraining order and a permanent injunction.

[43] Mr. Ludmer commenced a claim for relief under s. 35. Understandably, he did not pursue that relief at trial because Mr. Spira stopped his conduct and the children were, by that time, adults. I do not think this Court should entertain and determine a claim that was not pursued at trial: see York Region Condominium Corporation No. 890 v. RPS Resource Property Services Ltd., 2012 ONCA 670, 6 B.L.R. (5th) 171.

[44] Mr. Spira had brought a motion to quash the appeal in relation to the s. 35 claim on the foregoing basis. The motion was referred to the panel hearing the appeal. We advised counsel that the motion to quash and the appeal would be heard together, and that they should adapt their oral arguments accordingly. In view of the dismissal of the appeal on this ground, it is not necessary to deal with the motion to quash. It is therefore dismissed without costs.

Intentional Infliction of Mental Distress

[45] As noted above, no separate tort action exists for the intentional infliction of mental distress based upon interference with a parent’s access rights. Relief in relation to such conduct is now incorporated in s. 35 of the CLRA.

[46] Mr. Ludmer did not pursue his s. 35 claim at trial and cannot do so now on appeal.

Invasion of Privacy

[47] This Court has recognized the tort of invasion of privacy – sometimes referred to as “intrusion upon seclusion” – in Jones v. Tsige, 2012 ONCA 32, 346 D.L.R. (4th) 34. Sharpe J.A. identified the elements of the cause of action at para. 71 of his reasons:

The key features of this cause of action are, first, that the defendant’s conduct must be intentional, within which I would include reckless; second that the defendant must have invaded, without lawful justification, the plaintiff’s private affairs or concerns; and third, that a reasonable person would regard the invasion as highly offensive causing distress, humiliation or anguish.

[48] In this respect, he adopted, at para. 70 of his reasons, the essential elements of the action for intrusion upon seclusion from the Restatement (Second) of Torts § 652B (2010), which states:

One who intentionally intrudes, physically or otherwise, upon the seclusion of another or his private affairs or concerns, is subject to liability to the other for invasion of his privacy, if the invasion would be highly offensive to the other person.

[49] The trial judge correctly identified the elements of the cause of action and he found as a fact (a) that Mr. Spira had neither “hacked into” nor had access to Mr. Ludmer’s email account; (b) that Mr. Spira had never, himself, intercepted any of Mr. Ludmer’s emails; and (c) that Mr. Spira had never read any of the emails. The trial judge concluded that the simple fact that Mr. Spira had forwarded certain of these emails to Ms. Ludmer’s lawyer at her request was not sufficient to ground a claim for invasion of privacy. He found that it was Ms. Ludmer, not Mr. Spira, who had intentionally intruded upon Mr. Ludmer’s private affairs, and that whatever assistance Mr. Spira provided was not for purpose of assisting in her intrusion upon those private affairs.

[50] There was ample support in the record for these findings of fact, and there is no basis for interfering with them on appeal. They are dispositive of the appeal on the invasion of privacy ground.

Costs of the Proceedings

As Between the Ludmers

[51] The trial judge ruled that the Ludmers would each bear their own costs. A great deal of attention on the appeal was devoted to this disposition.

[52] With respect to the equalization of family property and support claims, Mr. Ludmer argues that, even though the trial judge concluded that the dispute turned out to be “truly a case of more or less equally divided success”, he, the respondent at trial, was in reality the successful party.

[53] For purposes of his costs analysis, the trial judge considered the major issues in the case to fall into two general categories: (i) claims involving the validity of the marriage contract and the family trust; and (ii) the income and support issues. He found Mr. Ludmer successful on the first of these and Ms. Ludmer, on balance, successful on the second.

[54] Mr. Ludmer argues, however, that he was successful on the “key” issues. By that he means the issues relating to the marriage contract, the family trust, and the exclusion of his beneficial interest in the trust from equalization of property and support calculations.

[55] There is no doubt that the findings on these issues were favourable to Mr. Ludmer. But the issues on which Ms. Ludmer was successful were favourable to Ms. Ludmer as well.

[56] A trial judge has a broad discretion in awarding costs, both as to quantum and as to payor and recipient. Here, success was divided and, as the trial judge noted, “both parties appear to have [waged] their litigation war without heed to the costs” and in “an all-out, ruinous” fashion. I see no error in law or in principle in his decision that “[e]ach party shall take responsibility for their own choices in the conduct of this litigation and bear their own costs”.

[57] It is true that the trial judge did not deal specifically with the costs of a number of motions reserved to him. I am satisfied, nonetheless, that his decision was designed to deal with the costs of the entire litigation war and took into account those earlier skirmishes.

[58] I see no basis for interfering with the trial judge’s costs award as between the Ludmers.

As Between Mr. Ludmer and Mr. Spira

[59] The trial judge awarded costs in the amount of $125,000 plus HST and disbursements in the amount of $5,223.01 in favour of Mr. Spira.

[60] Mr. Ludmer argues that the trial judge erred in failing to find that Mr. Spira’s inappropriate conduct disentitled him to costs, whereas he, Mr. Ludmer, had acted in good faith and made offers to settle. In the alternative, he argues that the quantum awarded was disproportionate and unreasonable in relation to the issues and the amount of the claim ($50,000).

[61] The trial judge came to a different conclusion, however. He found that Mr. Spira was entirely successful in the third party action. While Mr. Ludmer had made offers to settle, Mr. Spira had done so as well, and Mr. Spira’s offer – which was not accepted – was more favourable than the result obtained by Mr. Ludmer in the third party action. Rather than finding Mr. Spira’s conduct inappropriate, as he had declined to do at trial as well, the trial judge found that the claim against Mr. Spira “was a form of intimidation and punishment for ‘siding’ with [Ms. Ludmer] in the dispute”, that the claims had “no hope of success”, and that they “were instituted for emotional and purely strategic purposes” and “to inflict emotional and financial harm” (at para. 44).

[62] He concluded that Mr. Spira was entitled to costs on a full indemnity basis. That said, the trial judge awarded considerably less than the amount of the draft bill submitted by Mr. Spira’s counsel. Mr. Spira’s counsel sought $300,000. The trial judge awarded $125,000 (plus HST and disbursements).

[63] Mr. Ludmer contends, nonetheless, that the amount awarded was unreasonable. I do not agree.

[64] On the trial judge’s findings, Mr. Spira was drawn into the Ludmer’s dispute for extraneous reasons. He had to defend, and this no doubt required him to attend at some of the proceedings involving the Ludmers. The trial judge reduced counsel’s bill considerably, finding that the time spent was excessive, and that the amount claimed was disproportionate in relation to the amount at stake and the amount of trial time consumed.

[65] As noted, a trial judge has broad discretion in fixing costs. I see no error in his award here.

Preliminary Motions

[66] In addition to the motion to quash, referred to above, Mr. Spira’s counsel brought two other interlocutory motions relating to Mr. Ludmer’s attempt to appeal the costs order against him in the Spira action. These included a motion for directions, and a motion to dismiss the motion for leave to appeal costs for delay. In response, Mr. Ludmer brought a motion for directions and a motion to extend the time to file a notice of leave to appeal costs.

[67] These motions, originally brought before a judge in Chambers, were also referred to the panel hearing the appeal. Again, we directed that we would deal with them, if necessary, as part of the appeal argument on the merits.

[68] In view of my disposition of the costs appeal, it is not necessary to deal with the preliminary motions further. They, too, are dismissed.

Disposition

[69] In the result, the appeal is allowed only to the extent that the judgment below is varied to reflect the trial judge’s failure to attribute the sum of $38,096.36 to Ms. Ludmer in his calculation of s. 7 expenses owing. As a result, Ms. Ludmer owes Mr. Ludmer a total of $219,886.36 for her contribution to s. 7 expenses incurred by him. This leads to a variation in the net amount owing to Ms. Ludmer from $194,434 as ordered by the trial judge to $156,337.64, as agreed by the parties.

[70] The appeal in the Ludmer action is otherwise dismissed. While leave to appeal costs is granted, the appeal as to costs is dismissed.

[71] The appeal in the Spira action is also dismissed. Again, leave to appeal costs is granted, but the appeal as to costs is dismissed.

[72] Ms. Ludmer is entitled to her costs of the appeal in the Ludmer action, and Mr. Spira to the costs of the appeal in the Spira action.

[73] The parties have each filed draft bills of costs. After reviewing those draft bills and considering the submissions of counsel and of Ms. Ludmer, I fix those costs as follows: $20,000 to Ms. Ludmer; and $12,500 to Mr. Spira. Both amounts are inclusive of applicable taxes and disbursements.

Released: (RAB) NOV 21, 2014 “R.A. Blair J.A.”

“I agree R.G. Juriansz J.A.”

“I agree Gloria Epstein J.A.”