Hume v. Tomlinson, 2015 ONSC 843
COURT FILE NO.: FC-11-739-1
DATE: 20150206
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: TRACY LYNN HUME, Applicant
AND
MARC JAMES TOMLINSON, Respondent
BEFORE: Madam Justice Toscano Roccamo
COUNSEL: Suzanne Côté, for the Applicant
Barbara Cohen, for the Respondent
HEARD: November 28, 2014
SUPPLEMENTARY ENDORSEMENT
[1] On November 28, 2014, the Applicant, Tracy Hume, sought an order requiring the Respondent, Marc Tomlinson, to pay mid to high-end spousal support pursuant to the Spousal Support Advisory Guidelines (SSAG) retroactive to March 1, 2012. The order was sought notwithstanding the operation of a Separation Agreement dated August 29, 2010, addressing rights and responsibilities with respect to child support and spousal support. Because the Separation Agreement did not fix an amount for spousal support, and the Agreement was never filed with the Court for enforcement, the parties agreed that the spousal support obligations in the Agreement were subject to the principals expressed in Miglin v. Miglin, 2003 SCC 24, [2003] 1 S.C.R. 303 [Miglin].
[2] On December 18, 2014, in Hume v. Tomlinson, 2014 ONSC 7195, [2014] O.J. No. 6120, after taking into consideration the condition, means, needs of the parties, including the length of their co-habitation and the functions each performed during co-habitation, as provided in s. 15.2(4)(a) and (b) of the Divorce Act, as well as the objectives of a spousal support order under s. 15.2(6), I determined the spousal support provisions of the Separation Agreement at paras. 6.5 and 6.7 should be overridden. I concluded these provisions operated in a way that failed to recognize the economic disadvantage to the Applicant arising from marital breakdown; and the financial consequences to her arising from the care of the children during the marriage and after marital breakdown. I found that the operation of the impugned provisions, while promoting economic self-sufficiency of the parties, did not adequately recognize the Applicant’s right to both compensatory and non-compensatory spousal support.
[3] Accordingly, I concluded that the most equitable way to achieve fairness between the parties was to fix a reasonable amount for spousal support from 2012 to date, and to offset any over-payment of child support against the amounts found owing in spousal support. In addition, I extended the termination of spousal support set out in para. 6.10 of the Agreement to 2022, having regard to the fact that the Respondent was not in a position to pay any significant amount in spousal support from 2010 until January 2012 when he found employment.
[4] The parties now seek additional direction with respect to the calculations of arrears owing by the Respondent to the Applicant pursuant to para. 63 of my Decision dated December 18, 2014.
[5] The Applicant’s position is that the parties should simply calculate arrears by adding the amounts ordered for child and spousal support from 2012 to 2014 and subtract the amounts paid by the Respondent to determine the amount of arrears. As such, the Applicant’s determination of arrears is based on the net totals; that is a combination of spousal support and child support owed minus child support paid.
[6] The Respondent argues that child support and spousal support are treated differently for tax purposes. The Respondent correctly points out that my Order of December 18, 2014, relies upon the use of the Applicant’s DivorceMate calculations to determine spousal support, child support and contribution to s. 7 payments. The DivorceMate software provides calculations for taxable spousal support, non-taxable child support and the tax deductibility of s. 7 expenses. In addition, the ranges for quantum of spousal support payable under the SSAG take into consideration that the SSAG amounts are tax deductible by the payor and included in the recipient’s taxable income.
[7] I accept the Respondent’s submissions that this Court has determined that the tax ramifications of retroactive lump-sum spousal support orders, which reference the SSAG, must be considered: see Vanasse v. Seguin, 2008 35922 (ON SC), [2008] O.J. No. 2832 (Ont. S.C.) [Vanasse]. In Vanasse, the court reduced the amount of retroactive spousal support owed by 30% as it would not be taxable in the recipient’s hands. Similarly, in Bargout v. Bargout, 2013 ONSC 29, 35 R.F.L. (7th) 391 [Bargout], the court followed the approach in Vanasse and reduced the retroactive amount found owing by 30%, based on the fact the recipient would not pay tax on the retroactive spousal support award. Finally, in Thompson v. Thompson 2013 ONSC 5500, [2013] W.D.F.L. 4436, the court wrote, at para. 75, that with respect to:
The quantification of retroactive spousal support, the range that is generated by the SSAG must be adjusted because these ranges are based upon periodic ongoing payments which are presumed to be taxable in the hands of the recipient and tax deductible by the payor. A retroactive award must be “nettled down” to account for its non-taxable status in the recipient’s hands, and its non-tax deductible status in the payor’s hands.
[8] In Patton-Casse v. Casse, 2012 ONCA 709, 298 O.A.C. 111, the Court of Appeal affirmed McDermott J.’s review of the arbitral award regarding the appropriate quantum for retroactive lump-sum spousal support. McDermot J. reasoned that, as the order for a retroactive lump-sum payment was not deductible for the payor, the payor would in effect pay more now than he would have, had the amounts been paid on a periodic basis such that he could benefit from tax deductions (ibid, at para 22). McDermot J., taking a balanced approach, and considering both parties’ respective tax positions, awarded $177,000.00, by using a 25% reduction of support arrears.
[9] I note that the Courts of Appeal in Alberta, British Columbia and New Brunswick have determined that the tax ramifications of retroactive lump-sum spousal support orders, which reference the SSAG, must be considered: see Samoilova v. Mahnic, 2014 ABCA 65, 41 R.F.L. (7th) 83; Robinson v. Robinson, 2012 BCCA 497, [2012] B.C.J. No. 2572; and P.(B.) v. T.(A.), 2014 NBCA 51, [2014] W.D.F.L. 4069.
[10] In my opinion, the case law does not support the Applicant’s approach that would credit the Respondent’s payment, dollar for dollar of child support and s. 7 contributions against spousal support owing.
[11] In my opinion, to adopt the Applicant’s approach and subsequently rely upon the parties’ application to the Canada Revenue Agency (CRA) to make the appropriate tax adjustments based upon the Applicant’s request for a qualifying retroactive lump-sum payment (hereinafter, QRLSP) would not be appropriate: see Chapman v. Chapman, 2010 CarswellOnt 2343, 188 A.C.W.S. (3d) 152. As the Respondent correctly points out, the CRA may only been inclined to afford a special tax calculation for a QRLSP pursuant to form T1198 (as attached to the Applicant’s submissions) where the special tax calculation is deemed to be beneficial to the recipient. The Applicant has failed to satisfy me that such would be the case. Accordingly, a fair adjustment as between the parties, taking into account the Respondent’s tax status, could not be guaranteed adopting the Applicant’s approach.
[12] On the other hand, the case law I have referenced (see: Vanasse; Bargout; Lalonde v. Lalonde, [2009] W.D.F.L. 297 (Ont. S.C.); Patton-Casse v. Casse, 2011 ONSC 6182, 8 R.F.L. (7th) 393; and, Korkola v. Korkola, [2009] W.D.F.L. 1380 (Ont. S.C.)). has in each case reduced the retroactive lump-sum payable for arrears, taking into consideration the approximate marginal tax rate of the payor, as opposed to adjusting the lump-sum payable based upon the DivorceMate provisions for the “net” or “after-tax” amounts or “Net Disposal Income” NDI amount. As noted, the SSAG’s software, DivorceMate, addresses after-tax amounts for periodic support ordered rather than retroactive lump-sum payments.
[13] As such, I prefer the approach foremost adopted by the courts of this province, and would calculate the arrears owed to be $14, 363.02 from March, 2012 less 37% ($5,314.32) representing the average marginal tax rate of the Respondent. I therefore determine the net amount owing for arrears to be $ 9,048.70.
[14] If the parties are unable to agree on costs within 30 days of this Supplementary Endorsement, I will fix costs upon delivery of written submissions from each party of no more than 3 pages in length, along with any Offers to Settle and Costs Outline reflecting substantial indemnity and partial indemnity costs, plus disbursements.
Madam Justice Toscano Roccamo
Date: February 6, 2015
CITATION: Hume v. Tomlinson, 2015 ONSC 843
COURT FILE NO.: FC-11-739-1
DATE: 20150206
ONTARIO
SUPERIOR COURT OF JUSTICE
RE: Tracy Hume, Applicant
AND
Marc Tomlinson, Respondent
BEFORE: Madam Justice Toscano Roccamo
COUNSEL: Suzanne Côté, for the Applicant
Barbara Cohen, for the Respondent
Supplementary ENDORSEMENT
Toscano Roccamo J.
Released: February 6, 2015