Berta v. Berta

Ontario Reports

Court of Appeal for Ontario,

Cronk, Lauwers and van Rensburg JJ.A.

December 23, 2015

128 O.R. (3d) 730 | 2015 ONCA 918

Case Summary

Family law — Practice — Costs — Trial judge's award of full indemnity costs to husband set aside on appeal as it was based on erroneous findings that husband's offer to settle was as good as or better than results at trial and that husband was successful on all issues at trial. [page731]

Family law — Property — Equalization of net family property — Parties equal shareholders in company — Husband purchasing wife's shares for $2.2 million two years after separation — Trial judge not erring in assigning nil value to notional costs of disposition of each of wife's and husband's shares in calculating parties' net family property — Evidence not establishing that wife had clear intention to sell her shares to husband as of V-day.

Family law — Support — Spousal support — Trial judge ordering husband to pay indefinite spousal support to wife based on imputed annual income of $644,172 for husband and $484,356 for wife — Trial judge's reasons for imputing that income to wife precluding meaningful appellate review as his methodology and justification for income imputed to wife could not be discerned — Spousal support award set aside and issue remitted to trial judge for reconsideration.

The parties separated in 2010 after 27 years of marriage. They were equal shareholders in a company, ACCE. In 2012, the husband purchased the wife's shares in ACCE for $2.2 million. The trial judge ordered that the husband pay indefinite period spousal support to the wife of $5,380 per month based on imputed annual incomes of $644,172 for the husband and $484,356 for the wife. He ordered that the wife pay a $101,223.13 equalization payment to the husband. He awarded full indemnity costs of $460,179.57 to the husband. The wife appealed.

Held, the appeal should be allowed in part.

The trial judge's reasons on the issue of the amount of annual income to be imputed to the wife for spousal support purposes precluded meaningful appellate review. Neither his imputation methodology nor his justification for the income imputed to the wife could be discerned from his reasons. The spousal support award should be set aside and the issue should be remitted to the trial judge for reconsideration. The trial judge did not err in his calculation of the husband's annual income.

In calculating the parties' net family property, the trial judge did not err in assigning a nil value ($0.00) to the notional costs of disposition of each of the wife's and the husband's ACCE shares. The evidence did not establish that the wife had a clear intention to sell the shares to the husband as of the valuation date.

The trial judge's costs award was based on two misapprehensions of the evidence. First, he found that an offer to settle made by the husband which provided for the payment by the husband of a lump sum of $200,000 for support, which would not have been taxable in the wife's hands and which would be equivalent to approximately 56 months of the support that was ordered, was as good as if not better than the outcome at trial, which was an award of indefinite spousal support. The wife provided life expectancy data that indicated that her anticipated life expectancy was close to 13 years. Second, the trial judge found that the husband had been successful on all material issues. In fact, success at trial was divided on the main issues in dispute. The question of costs should be remitted to the trial judge.

Cases referred to

Biant v. Sagoo, 2001 28137 (ON SC), [2001] O.J. No. 3693, [2001] O.T.C. 695, 20 R.F.L. (5th) 284, 108 A.C.W.S. (3d) 106 (S.C.J.); Boston v. Boston, [2001] 2 S.C.R. 413, [2001] S.C.J. No. 45, 2001 SCC 43, 201 D.L.R. (4th) 1, 271 N.R. 248, J.E. 2001-1389, 149 O.A.C. 50, 28 C.C.P.B. 17, 17 R.F.L. (5th) 4, REJB 2001-25002, 106 A.C.W.S. (3d) 498; [page732] E. (C.L.) v. R. (B.M.), [2010] A.J. No. 679, 2010 ABCA 187, 320 D.L.R. (4th) 142, 28 Alta. L.R. (5th) 375, [2010] 11 W.W.R. 412, 487 A.R. 289, 86 R.F.L. (6th) 26, 190 A.C.W.S. (3d) 533; Hamilton v. Open Window Bakery Ltd., [2004] 1 S.C.R. 303, [2003] S.C.J. No. 72, 2004 SCC 9, 235 D.L.R. (4th) 193, 316 N.R. 265, J.E. 2004-470, 184 O.A.C. 209, 40 B.L.R. (3d) 1, [2004] CLLC Â210-025, 128 A.C.W.S. (3d) 1111; Hickey v. Hickey, 1999 691 (SCC), [1999] 2 S.C.R. 518, [1999] S.C.J. No. 9, 172 D.L.R. (4th) 577, 240 N.R. 312, [1999] 8 W.W.R. 485, J.E. 99-1206, 138 Man. R. (2d) 40, 46 R.F.L. (4th) 1, REJB 1999-12847, 88 A.C.W.S. (3d) 1044; Homsi v. Zaya, [2009] O.J. No. 1552, 2009 ONCA 322, 65 R.F.L. (6th) 17, 248 O.A.C. 168, 176 A.C.W.S. (3d) 1108; M. (C.A.) v. M. (D.) (2003), 2003 18880 (ON CA), 67 O.R. (3d) 181, [2003] O.J. No. 3707, 231 D.L.R. (4th) 479, 176 O.A.C. 201, 43 R.F.L. (5th) 149, 125 A.C.W.S. (3d) 650 (C.A.); Nielsen v. Nielsen, [2007] B.C.J. No. 2599, 2007 BCCA 604, 75 B.C.L.R. (4th) 81, 47 R.F.L. (6th) 26, 249 B.C.A.C. 117, 163 A.C.W.S. (3d) 104; Ottawa Community Housing Corp. v. Foustanellas (c.o.b. Argos Carpets) (2015), 125 O.R. (3d) 539, [2015] O.J. No. 2015, 2015 ONCA 276, 332 O.A.C. 354, 42 B.L.R. (5th) 1, 253 A.C.W.S. (3d) 338; Ruffudeen-Coutts v. Coutts, [2012] O.J. No. 1779, 2012 ONCA 263, 15 R.F.L. (7th) 35; Sordi v. Sordi, [2011] O.J. No. 4681, 2011 ONCA 665, 283 O.A.C. 287, 13 R.F.L. (7th) 197, 208 A.C.W.S. (3d) 97; Zavarella v. Zavarella (2013), 117 O.R. (3d) 641, [2013] O.J. No. 5435, 2013 ONCA 720, 313 O.A.C. 137, 369 D.L.R. (4th) 247, 40 R.F.L. (7th) 352, 235 A.C.W.S. (3d) 443

Statutes referred to

Divorce Act, R.S.C. 1985, c. 3 (2nd Supp.) [as am.], s. 15.2(4), (6)

Family Law Act, R.S.O. 1990, c. F.3 [as am.], ss. 4(1) [as am.], (1.1), (2) [as am.], 5

Rules and regulations referred to

Family Law Rules, O. Reg. 114/99, rules 18(14), 24(1), (4), (8), (11), (a), (b), (c), (d)

APPEAL from the order of R.J. Harper J. (2014), 122 O.R. (3d) 124, [2014] O.J. No. 4198, 2014 ONSC 3919 (S.C.J.) and the costs order, [2015] O.J. No. 3069, 2015 ONSC 1493 (S.C.J.).

Douglas A. Quirt, for appellant.

Peter M. Callahan, for respondent.

The judgment of the court was delivered by

[1] CRONK J.A.: — This matrimonial litigation arose from the collapse of a long-term marriage (27 years) between Delia Joan Berta (the "wife") and Raymond Louis Berta (the "husband"). Following separation, the wife applied in the Superior Court for a divorce, spousal support, equalization of property and various other forms of relief under the Divorce Act, R.S.C. 1985, c. 3 (2nd Supp.) and the Family Law Act, R.S.O. 1990, c. F.3 ("FLA"). At trial, the main issues in contention concerned the parties' annual incomes for spousal support purposes and the equalization of their net family properties ("NFPs"). [page733]

[2] The trial judge ordered that the wife pay an equalization payment of $101,223.13 to the husband. He further ordered that the husband pay indefinite periodic spousal support of $5,380 per month to the wife, commencing February 1, 2014. The trial judge also awarded full indemnity costs of $460,179.57 to the husband.

[3] The wife appeals the trial judge's rulings on the appropriate quantum of spousal support and the equalization payment. She further appeals from his costs award against her.[^1]

I. Background in Brief

(1) The marriage

[4] The parties married on December 31, 1982 and separated on March 26, 2010. At the time of trial, the wife was 75 years old and the husband was 68 years old. Each party has adult children from his or her previous marriage and several grandchildren.

[5] When the parties married in 1982, the wife was employed as an executive with the Steel Company of Canada ("Stelco"), now known as U.S. Steel, in Hamilton, Ontario. She held senior management positions with Stelco until she retired, after lengthy service with the company. On retirement, she formed her own consulting company.

[6] The husband worked throughout his career in clinical research. When the parties married, he was employed in that field by a company in Atlanta, Georgia. After their marriage, the wife supported the husband until he obtained landed immigrant status in Canada.

[7] In 1985, the husband obtained a clinical research position in Ontario. The following year, when his employer's business was sold, the husband decided to commence his own clinical research-based business. He incorporated Applied Consumer Clinical Evaluations Incorporated ("ACCE"), together with 911184 Ontario Ltd. ("911 Ltd."), for this purpose. The trial judge found, at para. 10 of his reasons, that 911 Ltd. was "a vehicle whereby monies could flow to [the parties] without the employees of ACCE knowing what remuneration the owners took".

[8] The parties were equal shareholders in ACCE and served as directors of the company. ACCE is the sole shareholder of 911 Ltd. [page734]

[9] On the evidence before the trial judge, both parties dedicated labour and funds to the establishment and growth of ACCE, although the husband operated the company on a day-to-day basis save for a brief period in the early 1990s.

[10] Over time, ACCE prospered, attracting several large food companies as clients. The wife's consulting business also flourished. As a result, the parties enjoyed a high standard of living throughout their marriage. The trial judge described their lifestyle, at para. 15, as "quite lavish". It included expensive travel, generous gifts to each other, the costly purchase and renovation of their matrimonial home, the use of a cottage owned by 911 Ltd., and entertaining, on some occasions, more than 100 guests.

(2) The separation

[11] In March 2010, the parties agreed to separate. At that time, their principal assets consisted of their matrimonial home and their shares in ACCE.

[12] Following separation, the matrimonial home was sold, the proceeds were divided equally between the husband and the wife, and each of the parties purchased separate residences. The wife also acquired a condominium in Florida.

[13] On April 3, 2012, the husband purchased the wife's shares in ACCE for $2.2 million. Under the terms of the share purchase agreement, the purchase price was payable in part on closing of the share transaction and the balance of $1.85 million over time.

(3) The trial judgment

[14] In late July 2010, the wife commenced proceedings under the Divorce Act and the FLA for spousal support from the husband, equalization of the parties' NFPs and a divorce.

[15] On August 20, 2014, following a nine-day trial, the trial judge ordered that the wife pay a $61,530.12 equalization payment to the husband and that the husband pay indefinite periodic spousal support to the wife of $5,380 per month, based on imputed annual incomes of $644,172 for the husband and $484,356 for the wife. He also granted the wife's request for a divorce and awarded full indemnity costs of $460,179.57, inclusive of disbursements and HST, to the husband.

[16] After his August 2014 ruling, the parties jointly requested that the trial judge correct various errors in his calculations of the parties' NFPs. By corrigendum dated July 21, 2015, the trial judge did so. As a result of adjustments to the parties' NFPs, the [page735] trial judge directed that the wife pay an adjusted equalization payment to the husband in the amount of $101,223.13.

(4) Additional facts

[17] Where additional facts are relevant, I will address those facts in the context of the issues to which they relate.

II. Issues

[18] There are three issues on appeal:[^2]

(1) Did the trial judge err in determining the parties' annual incomes for the purpose of spousal support?

(2) Did the trial judge err in equalizing the parties' NFPs by valuing the notional costs of the wife's disposition of her ACCE shares at $0.00?

(3) Did the trial judge err in awarding costs to the husband on a full indemnity basis (i) by holding that the result achieved by the husband at trial was as favourable as or more favourable than his pre-trial settlement offers; (ii) by relying on allegations of fraud; and (iii) by imposing a costs award that was disproportionate in the circumstances and unsupported by the evidence?[^3]

III. Analysis

(1) The parties' annual incomes

[19] The wife appeals the amount of her periodic spousal support award, arguing that it rests on flawed calculations of the parties' respective annual incomes. She submits that the trial judge overstated her annual income by about $461,000 and understated the husband's annual income by approximately $204,107.

(a) Wife's annual income

[20] The wife attacks the trial judge's calculation of her annual income on three grounds. First, she argues that the trial judge's [page736] reasons fail to reveal the basis and justification for his imputation of annual income to her in the amount of $484,356. Second, she submits that his income calculation involved impermissible "double dipping" because it included earnings from sources that had already been addressed in the wife's NFP, and equalized, namely (i) her Stelco pension; (ii) her registered retirement income fund ("RRIF"); and (iii) capital gains. Third, the wife maintains that the annual income imputed to her impermissibly included spousal support.

[21] The wife contends that, properly calculated, her annual income for the purpose of spousal support should include only income received by her under the Canada Pension Plan ("CPP benefits") ($11,567.04), investment income ($2,561.68) and U.S. Social Security benefits ("US benefits") ($9,216), as set out in her 2012 income tax return, for a total of $23,344.72.

[22] A trial judge's award of spousal support will not be interfered with lightly by a reviewing court. Deference to such awards promotes finality in family law litigation and recognizes the importance of the appreciation of the facts by the trial judge. However, appellate intervention is appropriate where there is an error in principle, a significant misapprehension of the evidence or the award is clearly wrong: Hickey v. Hickey, 1999 691 (SCC), [1999] 2 S.C.R. 518, [1999] S.C.J. No. 9, at para. 11. For the reasons that follow, I agree that the trial judge's determination of the wife's annual income for support purposes is unsustainable.

[23] The trial judge commenced his spousal support analysis by reviewing the evidence of two experts regarding the parties' incomes for support purposes. For reasons that he explained, he placed little weight on the opinion evidence of the wife's expert, Bruce Horsley, concluding that he had engaged in multiple, unnecessary disclosure requests and acted in an adversarial and partial manner. In contrast, he accepted the evidence of Steve Ranot, the husband's expert, describing him, at para. 62, as "very thorough, fair and objective".

[24] The husband also called Brian Braun of MacGillivray and Associates, a chartered accountancy firm, as an expert witness at trial. MacGillivray and Associates performed audits of ACCE and 911 Ltd.'s books and records for 2010 and 2011, and conducted a review of the companies' books for 2012. The trial judge found, at para. 77, that Mr. Braun also testified in "a fair, objective and neutral manner".

[25] The trial judge next addressed the factors governing an award of spousal support set out in s. 15.2(4) and (6) of the Divorce Act and some of the Supreme Court of Canada's related jurisprudence. He noted, at para. 92, that the court must [page737] examine the payee spouse's need, the payor spouse's ability to pay and, "to some extent", the issue of double recovery.

[26] The trial judge then turned to the application of the governing principles regarding spousal support to the wife's circumstances. He found, at para. 104, that the wife had been fully compensated for her contributions to the marriage and to ACCE prior to the date of separation. Accordingly, he held that she was not entitled to compensatory support. This ruling is not challenged on appeal.

[27] With respect to the wife's need for support, the trial judge made the following key findings regarding the wife's post-separation circumstances and conduct:

(1) the wife had significant assets with which to contribute to her own support, including her Stelco pension and her CPP and U.S. benefits. In combination, these assets yielded approximately $4,974 per month or $59,688 per annum in income (at para. 106(a));

(2) the wife also had significant funds invested in a RRIF account ($380,673.71), together with $59,326.29 in further savings (at paras. 106(c) and (f));

(3) by the time of trial, the wife had received $1,050,000 from the husband on account of the purchase price for her ACCE shares, plus about $350,000 as her share of the proceeds of sale from the parties' 2011 disposition of the matrimonial home (at paras. 106(d) and (e));

(4) the wife had chosen not to use her post-separation assets in order to maximize her income and, by her own admission, had done nothing to achieve the best return on her capital (at paras. 98, 107 and 122-23);

(5) the wife had also failed to make full disclosure of her income and assets in the matrimonial litigation, including with respect to her acquisition of a rental property in London, Ontario, her receipt of rental income from this property and, as well, interest income on a $200,000 loan made by her to her daughter (at paras. 98, 108 and 111-12); and

(6) the wife did not feel any responsibility to contribute to her own support. Instead, she had exhibited an attitude of "entitlement" (at paras. 110 and 117-18).

[28] Against this factual backdrop, the trial judge determined the parties' respective annual incomes for support purposes and the appropriate quantum of periodic support to [page738] be awarded to the wife. As I have said, he awarded the wife indefinite periodic spousal support of $5,380 per month. He based this award on his calculations of the parties' annual incomes and his finding that, post-separation, the wife had failed to utilize her available assets to maximize her income and return on capital.

[29] In imputing annual income to the wife, the trial judge said merely, at para. 120, "I find [the wife's] income to be as follows: $484,356, which includes pension income and investment income."

[30] However, the trial judge did not indicate the amounts of the wife's pension and investment income that he included in his income imputation analysis. Nor do his reasons furnish any other explanation as to the basis for the quantum of income imputed to the wife or as to why it was appropriate in the circumstances.

[31] At the appeal hearing, the husband's counsel candidly acknowledged that nothing in the trial judge's reasons reveals his methodology or any formula used by him to impute annual income to the wife. Nonetheless, counsel argued that the annual income fixed by the trial judge for the wife is explained by three factors: (i) the wife's pension and investment income as disclosed in her 2012 income tax return; (ii) interest earned on the wife's RRIF post-separation; and (iii) capital gains realized by the wife in 2012.

[32] I disagree. Based on the trial judge's reasons, I am unable to accept that these factors adequately account for the annual income that the trial judge imputed to the wife.

[33] There is no dispute that the wife's gross income from all sources for 2012 was $593,709.68 (including spousal support received). This amount was comprised of the following:

Other Employment Income $522.00

Old Age Security Pension $6,510.60

CPP or QPP Benefits $11,567.04

Other Pension Income $63,716.36

i) US Benefits -- $9,216

ii) Stelco Pension -- $39,729.60

iii) RRIF -- $14,774.45

Interest and Other Investment Income $2,561.68

Taxable Capital Gains $350,432.00

Support Payments Received $158,400.00

TOTAL: $593,709.68

[page739]

[34] Thus, based on her 2012 income tax return, the wife's pension and investment income totalled $84,355.68 (comprised of (i) Old Age Security Pension; (ii) CPP benefits and other pension income; and (iii) interest and other investment income).

[35] The husband contends that the remaining $400,000 of annual income imputed to the wife is based on her post-separation earnings on her RRIF and capital gains. The wife's 2012 tax return suggests that $14,774.45 (included in the wife's "Other Pension Income") could be attributed to annual RRIF income. The trial judge also mentioned approximately $6,000 per year in interest income on the wife's loan to her daughter and approximately $14,400 in rental income on the London property acquired by the wife. This leaves approximately $380,000 to be accounted for by capital gains or other investment income.

[36] It is true that the wife's 2012 income included $350,432 in taxable capital gains. It is also the case that, under the ACCE share purchase agreement, she receives capital payment instalments for several years on account of the purchase price for her ACCE shares. Under the terms of that agreement, the $2.2 million purchase price was to be paid to the wife as follows: (i) $350,000 at or around closing; and (ii) in installments: $50,000 on May 1, 2012; $150,000 on July 1, 2012; and 16 equal quarterly installments of $100,000 each (for an annual total of $400,000) from October 1, 2012. The last installment of $50,000 is payable on October 1, 2016.

[37] While consideration of all sources of the wife's income, together with her capital receipts under the ACCE share purchase agreement, to some extent might explain the trial judge's imputation of $484,356 in income per year for the years 2013 to 2016, it does not adequately explain the attribution of this income for the purpose of calculating indefinite spousal support. Further, I note that it is also unclear from the trial judge's reasons whether he distinguished the wife's capital receipts from her capital gains.

[38] In Boston v. Boston, 2001 SCC 43, [2001] 2 S.C.R. 413, [2001] S.C.J. No. 45, the Supreme Court held 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 to the payee spouse based on what income those assets could reasonably produce if invested. This assessment, however, cannot be based on artificial assumptions.

[39] In this case, looking forward from October 1, 2016, the wife could at the most be expected to have an asset portfolio of $2.2 million from the sale of [page740] her ACCE shares, plus (i) approximately $380,000 in her RRIF; (ii) $350,000 from the sale of the matrimonial home; and (iii) about $60,000 in additional savings. This would yield a total asset portfolio of approximately $2.99 million.

[40] The trial judge, at para. 107, criticized the wife for investing in investment vehicles that earned only marginal annual interest (between 1.35 to 1.9 per cent). Even at a generous annual interest rate of 6 per cent, and taking account of the wife's other pension and benefits income of $67,545 (other employment income, Old Age Security Pension, CPP and U.S. benefits and her Stelco pension), income from her RRIF, and her loan and rental income, this might be expected to yield approximately $282,119 in annual income ($179,400 (interest) + $67,545 + $14,774 + $20,400 (loan and rental income)).

[41] This calculation, while not intended to be precise, illustrates that an indefinite attribution of $484,356 in annual income to the wife remains both entirely unexplained and without any apparent justification on both the trial judge's reasons and the evidentiary record. In my opinion, to award $5,380 in monthly periodic support, indefinitely, on the basis of an imputed income of $484,356, in the absence of any explanation for this imputation, constitutes reversible error.

[42] In the result, I am compelled to conclude that the trial judge's reasons on the important issue of the amount of annual income to be imputed to the wife for spousal support purposes preclude meaningful appellate review. Neither his imputation methodology nor his justification for the income imputed to the wife can be discerned from his reasons. The parties and this court should not be left to guess at the basis and justification for the trial judge's calculation of the wife's annual income.

[43] Accordingly, I would set aside the trial judge's spousal support award. In light of this conclusion, it is unnecessary to address the wife's remaining complaints concerning the trial judge's calculation of her annual income.

(b) Husband's annual income

[44] The trial judge accepted Mr. Ranot's evidence concerning the husband's annual income in 2010 to 2012. He averaged the husband's annual earnings during that three-year period and concluded that the husband's annual income for spousal support purposes was $644,172.

[45] The wife does not dispute that the husband's annual income should be based on his average annual earnings for 2010 to 2012. However, she argues that the trial judge erred by understating the husband's average annual income by $204,107.30. In particular, the wife says, the trial judge failed to account for the [page741] following earnings that the husband realized, or ought to have realized: (i) $83,500 in income advances by ACCE to the husband in 2011; and (ii) $120,607.30 in advances accrued at ACCE's 2011 year-end.

[46] The wife maintains that Mr. Braun's and Mr. Ranot's evidence established that the amount at issue -- $204,107.30 -- should have been taxed personally to the husband. Because Mr. Ranot failed to take this income adjustment into account in calculating the husband's income, the trial judge erred by relying on his calculations.

[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.

[50] The dispute regarding the husband's 2011 earnings arises primarily from the evidence of Mr. Braun. Based on his firm's 2010--2011 audits of ACCE and 911 Ltd. and review of the companies' 2012 financial records, Mr. Braun testified that an accounting error had been made in 2011 relating to (i) a shareholder's loan of $355,944 that was debited to the husband and then credited to ACCE's retained earnings (the "shareholder's loan"); and (ii) a debit of $200,625 regarding retained earnings that was credited in 2012 as an accrued commission to the husband (the "accrued commission").

[51] Mr. Braun indicated that the necessary accounting adjustments for the shareholder's loan were made and the husband's loan account with ACCE was charged with this amount. Further, ACCE's management informed him that the amount of the accrued commission was going to be included in the husband's income. [page742]

[52] Mr. Braun also testified that ACCE and 911 Ltd.'s 2010 and 2011 financial statements fairly represented the income, expenses, assets and liabilities of the companies and that he found no evidence of any inaccuracy in the companies' 2012 financial statements.

[53] As summarized by the trial judge in his reasons, at paras. 69 and 79, Mr. Ranot testified that all the parties' expenses paid for by the companies had been accounted for; that he "did not see anything that would represent anything other than errors that could be and were corrected by accounting adjustments"; and that he "had no doubt that he saw all the money in the companies".

[54] The trial judge addressed the issue of the 2011 accounting error and made the following findings, at para. 77:

This [error] was picked up in the following year and resulted in [the husband] paying more taxes as an adjustment had to be made to his loan account in the following year to correct the error. This was in fact done and [the husband] was taxed on the higher amount in 2012.

[55] The wife contends that these findings are tainted by palpable and overriding error because there was no evidence at trial that the amount of the accrued commission error was actually included as income in the husband's income tax returns. In other words, although the husband's expert witnesses acknowledged that the husband should be taxed on this amount and the requisite adjustment to the husband's income should be made, in fact there was no evidence that this had actually occurred.

[56] The record supports this assertion.

[57] The trial judge's impugned statements [at para. 77] that "an adjustment had to be made to [the husband's] loan account in the following year to correct the error. This was in fact done and [the husband] was taxed on the higher amount in 2012" must be viewed in the context of the evidence at trial regarding the accounting error at issue. That evidence does not establish that the amount of the accrued commission error was included in the husband's income for tax purposes in 2011 or 2012. Nor, however, does the record confirm that it was not.

[58] Mr. Braun testified that the necessary accounting entries to adjust for the shareholder's loan error were made, and the husband's loan account was charged with this amount. However, he was unable to confirm that the husband had included the amount of the accrued commission error in his income because he had neither prepared nor reviewed the husband's tax returns.

[59] Mr. Ranot's evidence was to similar effect. He said that the best approach to correcting the 2011 accounting error was to [page743] make the appropriate adjustments to ACCE's and 911 Ltd.'s 2011 financial records, rather than adjusting their 2012 records. But, as with Mr. Braun, he could not confirm whether the husband included the income attributable to the accrued commission error in his personal income tax returns.

[60] Nor did the husband's evidence at trial clarify the issue. During his testimony, the husband was not asked if he included the amount of the accrued commission error in his 2011 or 2012 income for tax purposes. On cross-examination, he said only that he did not recall if his accountant brought the discrepancy to his attention. I note that the husband's 2012 income tax return does not form part of the record before this court.

[61] Thus, there was evidence at trial that the necessary accounting adjustments were made to correct the shareholder loan error. But the evidentiary record does not establish that the necessary adjustments to correct the accrued commission error were also made, at least in respect of the requisite adjustment to the husband's income. This gap in the evidence militates in favour of the conclusion that the trial judge's description of the evidence relating to the accounting adjustments, quoted above, in fact pertained to the shareholder loan error, but not to the accrued commission error.

[62] Clearly, the evidentiary record on this issue is less than satisfactory. I would summarize the pertinent, available evidence in this fashion:

(1) the expert accounting evidence established the 2011 accrued commission error and the need for accounting adjustments to correct it, including adjustments to the husband's income;

(2) ACCE and 911 Ltd.'s auditors were informed that the necessary accounting adjustments for the accrued commission error would be made by ACCE management;

(3) the auditors were satisfied that ACCE and 911 Ltd.'s 2010 --2011 consolidated financial statements fairly represented the companies' income, expenses, assets and liabilities and that the 2012 financial statements reflected no inaccuracies;

(4) Mr. Ranot concluded that any accounting errors "could be and were corrected by accounting adjustments". He proceeded on this basis in calculating the husband's annual income. However, neither he nor Mr. Braun were in a position to confirm that the husband's income, as opposed to the companies' books, was adjusted to account for the accrued commission error; and [page744]

(5) by the same token, there was no evidence at trial, accepted by the trial judge, establishing that the husband had failed to personally account for his income relating to the accrued commission error.

[63] The wife bore the onus at trial to establish an evidentiary foundation for the imputation of income that she requested for the husband: Homsi v. Zaya, [2009] O.J. No. 1552, 2009 ONCA 322, 65 R.F.L. (6th) 17, at para. 28; Nielson v. Nielson, [2007] B.C.J. No. 2599, 2007 BCCA 604, 47 R.F.L. (6th) 26, at para. 22; E. (C.L.) v. R. (B.M.), [2010] A.J. No. 679, 2010 ABCA 187, 86 R.F.L. (6th) 26, at para. 27. For the reasons outlined above, she failed to do so.

[64] It follows that the wife has not demonstrated a palpable and overriding error in the trial judge's calculation of the husband's annual income. On the evidentiary record at trial, it was open to the trial judge to accept Mr. Ranot's income calculations as the best available evidence of the husband's income for support purposes.

[65] I would reject this ground of appeal.

(2) Notional disposition costs of ACCE shares

[66] The trial judge ordered the wife to pay an equalization payment to the husband in the amount of $101,223.13, based on NFPs of $2.89 million for the wife and $2.68 million for the husband. In calculating the parties' NFPs, the trial judge assigned a nil value ($0.00) to the notional costs of disposition of each of the wife's and the husband's ACCE shares (the "share disposition costs").

[67] The wife argues that the trial judge erred in his equalization analysis by failing to value her share disposition costs at $364,884. She submits that, as of March 26, 2010, the date of separation ("V-day"), the sale of her ACCE shares was imminent and sufficient evidence was adduced at trial to support a $364,884 valuation of her share disposition costs. I disagree.

[68] The significance of this issue flows from the equalization of property scheme contemplated by s. 5 of the FLA. Under that scheme, on marriage breakdown, the spouse with the lesser NFP is entitled to an equalization payment from the other spouse in an amount equal to one-half the difference between the spouses' respective NFPs. Section 4(1) of the FLA defines the term "net family property" (NFP) as the value of all the property, except property exempted under s. 4(2), that a spouse owns on the "valuation date" (V-day), after deducting specified debts and other liabilities. Section 4(1.1) of the FLA stipulates that [page745] the specified liabilities to be deducted from a spouse's NFP include "any applicable contingent tax liabilities in respect of the property".

[69] In this case, the parties accept that, for property equalization purposes, V-day is the date of separation. The deduction from the wife's NFP of any share disposition costs in excess of $0.00 would narrow the difference between her NFP and that of the husband. This, in turn, would reduce and potentially eliminate any equalization payment owed to the husband.

[70] In support of her argument that the trial judge erred by failing to value her share disposition costs at $364,884, the wife relies on the undisputed evidence of the husband's April 2012 purchase of her ACCE shares for $2.2 million, together with the evidence of the taxes paid by her in 2012 on the capital gains arising from this share purchase transaction, as reflected in her 2012 income tax return.

[71] The wife also relies on the evidence of David Straughan of MacGillivray and Associates, who was initially retained by the husband to assist in structuring the husband's purchase of the wife's ACCE shares following separation.

[72] Mr. Straughan testified that his firm advised both parties on the income tax implications of the proposed share purchase transaction and various options to minimize potential detrimental tax consequences for the wife arising from the transaction. He explained that, based on an assumed purchase price of $2 million for her ACCE shares, the wife would realize after-tax proceeds of $1,635,116. The difference between this amount and the assumed purchase price of $2 million ($364,884) represented the wife's share disposition costs.

[73] Based on Mr. Straughan's calculations, the wife says that, in calculating her NFP, $364,884 share disposition costs should have been deducted from the value of her property in accordance with ss. 4(1) and 4(1.1) of the FLA.

[74] The trial judge's reasons confirm that he appreciated the applicable legal principles governing the valuation of the parties' share disposition costs. He stated, at para. 24, "the court must make a meaningful determination of the value to be attributed [to the costs of disposition] at the date of separation". Citing this court's decision in Zavarella v. Zavarella (2013), 117 O.R. (3d) 641, [2013] O.J. No. 5435, 2013 ONCA 720, he framed the applicable test in this fashion, at para. 24: "What is the reasonable likelihood that the debt will be incurred and what is the reasonable estimate of value?"

[75] Applying this test to the facts of this case, the trial judge concluded that a nil value should be assigned to the wife's share [page746] disposition costs, as well as to those of the husband. In reaching this conclusion, he made no reference to Mr. Straughan's testimony, or to the tax calculations performed by MacGillivray and Associates. That evidence, contrary to the trial judge's suggestion, did provide some basis for the calculation of the tax consequences to the wife associated with the disposition of her ACCE shares.

[76] That said, the fact that the trial judge did not specifically address this evidence is of no moment. I say this for the following reasons.

[77] First, the calculations performed by Mr. Straughan, as set out in a summary report dated November 22, 2011, were undertaken in connection with the proposed post-V-day sale by the wife of her ACCE shares to the husband. The sale occurred in April 2012, two years after V-day.

[78] The relevant inquiry was not what reasonable or notional share disposition costs should be assigned to the wife's ACCE shares at the time of the 2012 share transaction but, rather, whether there was a reasonable likelihood, as of V-day, that the wife would sell her shares and, if so, at what reasonably estimated value. Mr. Straughan provided no evidence about the share disposition costs, for either party, as of V-day. Indeed, there was no direct evidence at trial from any source concerning such costs, as of V-day.

[79] Second, the trial judge found that, as of V-day, the wife's sale of her ACCE shares was contemplated only as part of the parties' proposed joint sale of ACCE to a third party. This sale ultimately collapsed. The trial judge held, at para. 24, that he was "not given sufficient evidence" in order to meaningfully assess the value of any notional disposition costs. He concluded, at para. 26, that the "only thing" that was certain was that the parties owned equal shares and would have incurred similar costs of disposition for their ACCE shares on the sale of the company, which would have resulted "in no imbalance in the net family property".

[80] These findings were open to the trial judge. As I have said, Mr. Straughan's expert evidence did not pertain to the share disposition costs, as of V-day, of a sale by the wife of her ACCE shares. Further, the husband led no evidence of his anticipated share disposition costs as of V-day, or at any other date.

[81] Nor was the wife's trial testimony inconsistent with the trial judge's findings. The transcript does not support the conclusion that she had a clear intention to sell her ACCE shares as of V-day. Both parties testified that the wife had wanted to sell her ACCE shares prior to separation, and the wife said that she [page747] had offered or was at least willing to sell her shares. But there was also evidence, described above, that as of V-day, the parties were attempting to sell their entire joint interest in the company to a third party.

[82] The trial judge's appreciation of the evidence concerning the wife's share disposition costs and his assignment of weight to that evidence attract considerable deference from this court. See, for example, Ottawa Community Housing Corp. v. Foustanellas (c.o.b. Argos Carpets) (2015), 125 O.R. (3d) 539, [2015] O.J. No. 2015, 2015 ONCA 276, 332 O.A.C. 354, at para. 64. In the circumstances described above, the trial judge was entitled to conclude that the only reliable evidence before him was that, if the parties' ACCE shares were sold, they would both incur similar share disposition costs, thus creating no imbalance in their respective NFPs. I see no basis on which to interfere with this aspect of the trial judge's NFP calculation for the wife.

(3) Remedy

[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 [page748] 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.

(4) Trial judge's costs award

[87] The wife argues that the trial judge erred in awarding costs on a full indemnity basis (i) by holding that the husband achieved a result at trial that was "as favourable as or more favourable" than his pre-trial settlement offers, thus triggering the costs consequences of rule 18(14) of the Family Law Rules, O. Reg. 114/99 (the "Rules"); (ii) by relying on allegations of fraud; and (iii) by imposing a costs award that was disproportionate in the circumstances and unsupported by the evidence.

[88] A trial judge's costs award attracts considerable deference from a reviewing court. Absent an error in principle, or unless a costs award is plainly wrong, appellate intervention with a trial judge's discretionary costs ruling is precluded: Hamilton v. Open Window Bakery Ltd., [2004] 1 S.C.R. 303, [2003] S.C.J. No. 72, 2004 SCC 9, at para. 27. In this case, I agree with the wife that the trial judge erred in principle in fashioning his costs award.

[89] In family law cases, a trial judge's discretion to award costs is subject to the provisions of the Rules. Rule 24(1) creates a presumption that a "successful party is entitled to the costs of . . . a case". But it does not require that a successful party is always entitled to costs: M. (C.A.) v. M. (D.) (2003), 2003 18880 (ON CA), 67 O.R. (3d) 181, [2003] O.J. No. 3707 (C.A.), at para. 40. Rule 24(4) states that a successful party who has behaved "unreasonably" may be deprived of all or part of his or her costs or ordered to pay all or part of the unsuccessful party's costs. Further, in cases where a party has acted in bad faith, rule 24(8) directs that the court "shall decide costs on a full recovery basis and shall order the party to pay them immediately".

[90] Rule 24(11) outlines the factors to be considered in awarding costs. These include the importance, complexity or difficulty of the issues (rule 24(11)(a)), the reasonableness or unreasonableness of each party's behaviour in the case (rule 24(11)(b)), the lawyer's rates (rule 24(11)(c)), and the time properly spent on the case (rule 24(11)(d)).

[91] Moreover, as in other civil cases, offers to settle in family law cases carry costs consequences. Rule 18(14) stipulates that if a party makes an offer and obtains an order that is "as favourable as or more favourable than the offer", that party is entitled [page749] to "full recovery of costs from that date". However, the court retains a discretion not to make an award of full recovery of costs even where a party has met the conditions in rule 18(14): M. (C.A.), at para. 43.

[92] In Biant v. Sagoo, 2001 28137 (ON SC), [2001] O.J. No. 3693, 20 R.F.L. (5th) 284 (S.C.J.), the court considered the costs award scheme under the Rules and commented, at para. 20:

[T]he preferable approach in family law cases is to have costs recovery generally approach full recovery, so long as the successful party has behaved reasonably and the costs claimed are proportional to the issues and the result. There remains, I believe, a discretion under r. 24(1) to award the amount of costs that appears just in all the circumstances, while giving effect to the rules' preeminent presumption, and subject always to the rules that require full recovery or that require or suggest a reduction or an apportionment.

[93] This court has repeatedly endorsed the Biant court's approach to the determination of costs in family law disputes: see, for example, Ruffudeen-Coutts v. Coutts, [2012] O.J. No. 1779, 2012 ONCA 263, 15 R.F.L. (7th) 35, at para. 4; Sordi v. Sordi, [2011] O.J. No. 4681, 2011 ONCA 665, 13 R.F.L. (7th) 197, at para. 21; M. (C.A.), at para. 40.

[94] Thus, a successful party in a family law case is presumptively entitled to costs. An award of costs, however, is subject to the factors listed in rule 24(11), the directions set out under rule 24(4) (unreasonable conduct), rule 24(8) (bad faith) and rule 18(14) (offers to settle), and the reasonableness of the costs sought by the successful party: M. (C.A.), at paras. 40-43.

[95] The trial judge explicitly addressed the principles governing costs under the Rules, including the costs considerations set out in rule 24(11). With respect to these considerations, he found, at paras. 18-23 of his costs reasons,

(1) the issues in contention at trial were important and complex;

(2) the wife and her expert both acted unreasonably throughout the litigation. For instance, the wife refused to acknowledge the parties' date of separation until the opening of trial. She also took untenable positions regarding the parties' NFPs and "created the climate" that fed her expert's unreasonable litigious conduct, which, in turn, "throated" efforts to settle and led to disproportionate and "unending requests for disclosure";

(3) the wife also made baseless allegations of fraud against the husband; and [page750]

(4) in contrast, the husband and his experts acted in a reasonable manner throughout the proceedings.

[96] These findings are amply supported by the evidentiary record. They strongly support an award of costs to the husband on a full recovery basis. In particular, I note that, although the wife did not expressly plead fraud, the record confirms that, supported by her expert, the wife repeatedly alleged or insinuated fraudulent conduct by the husband throughout the trial. On the trial judge's findings, the wife failed to establish fraud and, generally, acted unreasonably in the conduct of the litigation.

[97] The trial judge also considered the costs consequences of the husband's pre-trial offers to settle. After reviewing the husband's first offer to settle and concluding that it did not attract costs consequences, the trial judge turned to the husband's second offer to settle, dated November 5, 2013. In respect of this offer, he stated, at para. 24:

I agree with counsel for the [husband] that the [husband's] second offer provided that the [husband] pay a lump sum of $200,000 for support. That amount would not have been taxable in the [wife's] hands and would be equivalent to approximately $300,000. At the rate of spousal support that I did order ($5,380.00 per month) the $300,000.00 equivalent would be equal to approximately 56 months of support that was ordered. Given the respective ages and health of the parties that lump sum offer was most reasonable.

[98] The trial judge concluded, at paras. 25-26:

As a result of the above findings that include:

a) The unreasonable conduct on the part of the [wife] in the conduct of the case;

b) The allegations of fraud that were not supported by any evidence;

c) The [husband's] offers to settle that were as good as if not better than the outcome at trial; and

d) The success of the [husband on] all material issues.

I order that the [wife] shall pay to the [husband] full indemnity costs.

[99] And it is here, with respect, that I conclude that the trial judge fell into error in two ways.

[100] First, the husband's November 2013 offer to settle was not "as good as if not better than the outcome at trial" achieved by the husband. As the trial judge noted, the lump sum support amount contained in that offer, on an after tax basis, was the equivalent of approximately 56 months (4.8 years) of spousal support at the monthly rate awarded by the trial judge. But, the [page751] trial judge awarded the wife indefinite periodic spousal support. In her costs submissions before the trial judge, the wife provided life expectancy data that indicated her anticipated life expectancy was close to 13 years. The husband led no evidence to the contrary.

[101] Thus, it was an error in principle to hold, as the trial judge did, that the husband's November 2013 offer was "as good as if not better" than the results at trial. Consequently, the November 2013 offer could not trigger the costs consequences of rule 18(14).

[102] Second, the trial judge held that the husband had been successful at trial "[on] all material issues". This, too, was incorrect. Spousal support was a hotly contested issue at trial. The husband maintained that the wife was not entitled to spousal support. The wife prevailed on this issue as the trial judge ordered indefinite periodic spousal support. He also ordered the wife to pay an equalization payment to the husband. Accordingly, the husband was not successful at trial on all material issues. Rather, success at trial was divided on the main issues in dispute.

[103] The trial judge made no explicit finding of bad faith against the wife, so as to trigger rule 24(8). Yet, he found that the wife and her expert acted unreasonably in the conduct of the litigation; that the wife made serious, unsupported allegations of fraud; and that, in contrast to the wife, the husband acted reasonably throughout. Under rule 24(4), these findings permitted the trial judge to deprive the wife of any or all of her costs despite her partial success at trial, and to grant the husband any or all of his costs.

[104] That said, I have already concluded that two of the factual findings relied on by the trial judge to anchor his award of full indemnity costs (the November 2013 offer and success at trial) are based on a significant misapprehension of the evidence. It is unclear how much weight the trial judge attached to these findings in crafting his costs order.

[105] Given the errors that I conclude the trial judge made in fixing the quantum of spousal support, the appropriate remedy is to remit the matter for the trial judge's reconsideration, in light of these reasons. The trial judge is in the best position on that reconsideration to fix an appropriate award of costs, in light of the relative success of the parties, their conduct at trial and other relevant considerations under the Rules.

IV. Disposition

[106] For the reasons given, I would allow the appeal in part by setting aside para. 3 of the divorce order (spousal support) [page752] and remit the question of the proper quantum of the wife's annual income for spousal support purposes and the consequences, if any, of that determination on the amount of periodic spousal support to be paid to the wife by the husband to the trial judge for reconsideration in light of these reasons. Pending the trial judge's reconsideration ruling, the husband shall continue to pay monthly spousal support to the wife in accordance with para. 86 of these reasons. I would also grant leave to appeal costs and remit the question of costs to the trial judge. In all other respects, I would dismiss the appeal.

[107] As success on this appeal has been divided, I would make no order as to the costs of the appeal.

Appeal allowed in part.

[^1]: The husband initially filed a cross-appeal. He abandoned his cross-appeal in August 2015.

[^2]: In her factum, the wife also argued that the trial judge made several calculation errors concerning the value of various of the parties' assets. The trial judge corrected these errors in his corrigendum dated July 21, 2015.

[^3]: In her factum, the wife challenged the trial judge's award of costs on a substantial indemnity basis. In fact, the trial judge awarded costs on a full indemnity basis.