Court File and Parties
COURT FILE NO.: (Simcoe File) 188/07 DATE: 2017-07-25 ONTARIO SUPERIOR COURT OF JUSTICE
B E T W E E N:
EDNA LORIMER Robert MacLeod, for the Applicant Applicant
- and -
LARRY LORIMER Edward Kiernan, for the Respondent Respondent
HEARD: May 18, 2017 at Simcoe
REASONS FOR JUDGMENT
The Honourable Mr. Justice A.C.R. Whitten
I Introduction
[1] By order dated January 11, 2011, this court established a regime of both spousal and child support payable by the Respondent (Larry). The same order imputed income to the Applicant (Edna) which has been part of the calculation as per the Spousal Support Guidelines to this day. The child support payable, pursuant to the order was satisfied as of 2014. That being said, the children still reside with Edna in London, Ontario. Edna continues to support her children to the extent that she can, until they achieve a satisfactory economic base.
[2] That order, imputed to Larry an addition income of $40,000, above and beyond his salary from Stelco. That imputed income reflected the fact that he farmed as well and was able to market his products. That farming income has now ceased, as the farm property that Larry owned and worked was sold in 2013. The sale was actually completed in 2014. At that point, Edna had no interest in the property, as in accordance with an earlier settlement in 2008, she had received $112,500.
[3] As a result of the sale, Larry experienced a capital gain, half of which was included as income in the taxation year 2014, an addition which raised his line 150 Net Income to $212,248.48.
II Issue
[4] Effectively there is no rationale for imputation of farming income to Larry from 2013 onwards. Counsel worked diligently May 18, 2017 to reduce the outstanding issues. The issues with respect to arrears of support were resolved. The remaining issue for the court to decide was to what extent should the capital gain factor into the spousal support payable by Larry in 2015? It is realized that after 2013 the income base for spousal support calculation is simply Larry’s Stelco incomes. So should all, part, or none of the gain be included?
III Applicable Law
[5] In Brophy v. Brophy (2002) CarswellOnt. 3163, Justice Linhares de Sousa opined that because s. 18 of the Child Support Guidelines applies to the calculation of a paying spouse’s ability to provide support for a dependent, that the same format logically would apply to the calculation of income for the purposes of spousal support (para. 35). Other decisions such as Mayer v. Mayer (2013) ONSC 6087, Murray v. Murray, O.J. No. 3350, and Ludmer v. Ludmer, 2013 ONSC 784 have also adopted this approach.
[6] Justice Penney in Ludmer, (Opus cited) amongst other things reviewed the three conceptual bases for spousal support; namely, compensatory, contractual and non-compensatory (para. 215). None of these bases are really applicable in this particular issue as Larry’s income spiked in a one-off fashion.
[7] The latter phenomena is recognized in the Child Support Guidelines.
[8] Section 15 is entitled “Determination of Annual Income”. Generally speaking it is the “total income” referred to in the T1 General Tax Form issued by Revenue Canada (otherwise known as line 150) (reference s. 16 of the CSG).
[9] Section 17 (1) of the Guidelines speaks to the phenomena pattern of income. Obviously some payors experience fluctuations in income and there is a need to obtain a means or average income. Subsection (1) states:
“If the court is of the opinion that the determination of a parent or a spouse’s annual income under section 16 would not be the fairest determination of that income, the court may have regard to the parent or spouse’s income over the last three years and determine “ an amount that is fair and reasonable in light of the pattern of income, fluctuation of income or receipt of non-re-recurring amounts during those years.”
[10] Clearly Larry’s incurring of a capital gain, fifty percent of which is considered taxable income is “a non-recurring amount”.
[11] The rationale for judicial discretion as created in such sections is as Justice Penny stated in Ludmer, “The payor’s income for income tax purposes may not be an accurate reflection of the money that the spouse has available for support payments.” (ref. para. 152)
[12] Justice Harper in Berta v. Berta, 2016 ONSC 5723, encourages jurists to consider whether or not to include capital on a case by case basis… (there are some cases where the realization of a capital gains is a frequent phenomena)… It should be rarely considered when there is a one-time capital sale…” (para. 29)
[13] Generally we do not require of a spouse that they deplete their capital in the satisfaction of spousal support.
IV Application
[14] With ongoing support, the jurist is required to consider the means, needs, and other circumstances of each spouse. As Justice Penny expands, “Condition of a spouse includes such factors as their age, health, needs, obligations, dependents and their status in life. A spouse’s “means” encompasses all financial resources, capital assets, income from employment and among other sources from which the spouses derives gains or benefits….” (para. 212)
[15] Edna, by virtue of her payout with respect to the farm property in 2008 would have benefitted in part by the increase in the value of this property, i.e. gain as of 2008. That gain would be part of the capital gains that caused Larry increased tax liability.
[16] That gain, net tax implications no doubt will be used by Larry to generate additional income.
[17] Edna’s circumstances have not improved much, partly because she has chosen an ongoing responsibility for the care of the adult children. The loss of the spousal support based on an additional imputed farming income of $40,000 is no doubt a blow to Edna’s ability to stay “afloat”, roughly a $500 per month drop at the low range of the Spousal Support Guidelines.
[18] Fairness does not require the entire gain be imputed to Larry, nor does it require the inclusion of the taxable amount of the gain. To aid Edna in transitioning to the lower support regime based on Larry’s Stelco income, it is fair that for 2015 an additional $60,000 income be attributed to Larry for the purposes of calculating spousal support (roughly one-half of the taxable portion of the capital gain). Hopefully this calculation will enable counsel to conclude the rest of the support calculations touched upon in the draft order provided to the court.
[19] Counsel, failing agreement as to the amount of costs payable to a party, are to exchange Bills of Costs and submissions of no greater than five pages within 45 days of the receipt of this judgment and to file those submissions with the court.
Whitten J.
Released: July 25, 2017