CITATION: Curry v. Curry, 2017 ONSC 4778

COURT FILE NO.: FC-12-2306-1

DATE: 2017/08/24

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Ian Hugh Curry, Applicant

AND

Cathy Ann Greene Curry, Respondent

BEFORE: Justice A. Doyle

COUNSEL: H. Hunter Phillips, Counsel for the Applicant

Leonard Levencrown, for the Respondent

HEARD: August 1, 2017

ENDORSEMENT

Overview

1On March 17, 2016, the Court rendered a trial decision dealing with spousal and child support and other miscellaneous issues. (Curry v. Curry 2016 ONSC 1893).

2Regarding the determination of the retroactive amount of support owing, the Court directed that the parties were to complete Spousal Support Advisory Guidelines (SSAG) calculations, using the parties’ Line 150 incomes, including other income but not limited to investment income, interest and capital gains, and the appropriate deductions, including Schedule III adjustments.

3If the parties were unable to agree on the retroactive amounts of spousal and child support, they were to provide written submissions to the Court.

4After reviewing the parties’ submissions and documents filed, the Court directed that the parties arrange a half day hearing to provide evidence with respect to the following questions:

i) To what extent of Mrs. Curry’s income declared in her 2012, 2013, 2014 and 2015 tax returns received from the 2012 Trust and other investments, were payments to be credited towards equalization payment from Mr. Curry?

ii) Did Mrs. Curry’s declare income in her 2012, 2013, 2014 and 2015 tax returns from the 2012 Trust or other investments even though she did not actually receive this income?

iii) Did Mr. Curry receive monies from the 2012 Trust or other investments that should have been declared on his T1 General Return?

5At the hearing, the Court received the following evidence:

− Mr. Curry’s affidavit dated June 23, 2017;

− Mrs. Curry’s affidavit dated July 14, 2017;

− David Mason’s (Mr. Curry’s expert from Deloitte) letter dated February 9, 2017 which was entered as an expert report; (“Mason Report”);

− James Boyce’s (Mrs. Curry’s expert) letter dated July 4, 2017 which was entered as an expert report; (“Boyce Report”);

− letter from Deloitte dated October 24, 2016 which was entered for the truth of its contents.

6The Court declined to deal with the 2016 and post-trial support obligations. The parties have advised me that a Motion to Change hearing is scheduled for October 2017. Therefore, at that time, the Court can deal with post-trial support adjustments.

7I also declined to deal with retroactive s. 7 expenses as this was not raised as an issue at trial. At trial, submissions made by Mrs. Curry’s counsel regarding s. 7 expenses dealt with the issue of whether Mrs. Curry was permitted to be named on the trust account for the children that had been set up by Mr. Curry to pay for their extracurricular activities and educational costs.

8The Court ordered Mr. Curry to continue to control the accounts and ensured that Mrs. Curry had the right to obtain information from Mr. Curry on a regular basis.

9Mrs. Curry’s request for $42,909.62 in retroactive s.7 expenses was not argued at trial. If there are issues regarding expenses for the children, the parties have a mechanism in the agreement dated January 18, 2015, para. 11, which states that the parties are to attend with a parenting coordinator who is given the power to make a binding decision on these issues.

10For the reasons that follow, regarding retroactive spousal/child support for the years 2012, 2013, 2014 and 2015, the Court orders Mr. Curry to pay Mrs. Curry the amount of $68,141.63 within 30 days.

Issues

11In order to determine the retroactive support owed by Mr. Curry for 2012 to 2015, the Court must determine for each year the following:

(i) What is Mr. Curry’s Income?

(ii) What is Mrs. Curry’s Income?

(iii) What amounts of child support and spousal support will provide Mrs. Curry with 60% of the Net Disposable Income (NDI) as per the final Judgment?

(iv) Was there an overpayment or underpayment?

Mr. Curry’s Position

12Mr. Curry sets out in his SSAG calculations that the amount of support payable is as follows:

Year	Father’s Income	Mother’s Income	Child support	Spousal Support
2012	$305,602	$26,650	$5,872	$3,624
2013	$358,183	$43,905	$6,808	$3,763
2014	$481,925	($11,193)	$9,010	$6,660
2015- (January to September for 4 children)	$679,258	($28,294)	$12,523	$9,641
2015 (October to December for 3 children as Julie left for Placements Abroad program)	$679,258	($28,294)	$10,232	$14,230

13Based on the above calculations, Mr. Curry’s position is that he owes approximately $50,000 in retroactive support.

Mrs. Curry’s position:

14Mrs. Curry sets out in her SSAG calculations that the amount of support payable would be as follows: (the Court notes that the length of cohabitation is indicated as 0 years)

Year	Father’s Income	Mother’s Income	Child support	Spousal Support
2012	$325,548	$18,225	$6,227	$5,425
2013	$443,695	$19,223	$8,330	$8,136
2014	$742,150	($3431)	$13,642	$10,591
2015	$948, 087	($38,163)	$17,308	$13,514

15Based on the above amounts, the mother indicated that based on her calculations, overpayment/underpayments are set out below.

Year	Overpayment	Underpayment
2012	($8253)
2013		$83,208
2014		$140,176
2015		$161,034
2016
Total Underpayment:		$376,165

Analysis

Experts’ Reports

16The determination of incomes for the parties is complicated due to the existence of a family trust called 2012 Curry Trust (“the Trust”).

17In January 2012, Mr. Curry lent $1.5M to the Trust in exchange for a promissory note with an interest rate of 1% which is the prescribed rate as determined by the Canada Revenue Agency (CRA). He was the sole trustee and controlled the designation of the income allocated by the trust to the beneficiaries who were Mrs. Curry and the four children.

18As an income beneficiary and capital beneficiary of the trust, Mrs. Curry received monies as taxable and non-taxable distributions.

19On an annual basis Mr. Curry reported the interest on the loan to the trust. Income earned by the trust, net of the interest paid to Mr. Curry, was allocated to the beneficiaries of the Trust.

20Mr. Curry, as the sole trustee, provided instructions to Deloitte, he authorized Deloitte to file the annual T3 Trust Income Tax and Information Return and the Summary of Trust Income Allocations and Designations.

21The Mason Report indicates the following:

− The repayment of the loan by the trust was not taxable and was not declared on Mr. Curry’s T1 Income tax and Benefit return. Since he was not an income or capital beneficiary of the trust, he was not entitled nor permitted to receive any additional funds.

− He summarizes the taxable income allocation for each year as follows. The Trust allocated income to Mrs. Curry each year with the exception of 2013 when half of the trust income was split between the children. All allocations to Mrs. Curry were reported on the trust tax return and T3 slips issued by the Trust.

22The Boyce report stated the following:

− In 2014, Ms. Curry was allocated $90,886.44 as capital gains from the trust as per the T3 slip. She was allocated $11,783.89 as actual dividends from the trust according to her tax slip. She actually received $57,227.11 (1/2 of the capital gains which was shown on her 2014 tax return which she paid tax on + $11,783.89 which was also shown on her 2014 tax return and she paid tax on) which was credited towards her Equalization Payment.

− In 2015, Mrs. Curry was allocated $126,212.80 in her trust slip and she received $63,106.40 from the trust and the entire amount was credited to Equalization Payment. The full amount was reported on her tax return.

− On page 2, he states that the full amounts of income allocated to Mrs. Curry from the Trust were reported on Mrs. Curry’s personal tax returns in each of these years. Actually only 50% of the capital gains were reported on Mrs. Curry’s personal income tax return see page 4.

23Mr. Boyce confirms that for the purpose of establishing income to determine support, the SSAG must be modified so that taxable capital gains realized is replaced by “actual amount of capital gains realized”.

24Another important fact is set out in the Boyce report at page 5:

Please note that only 50% of the capital gains made within the Trust are taxable. Based on the information provided to us, Mrs. Curry only received the taxable portion of the capital gain each year. We are advised that the non-taxable portion of the Trust’s capital gains were added to the Trust’s capital and reinvested by the trustee. As such, the amounts for capital gains allocated to Mrs. Curry on the T3 tax slips do not necessarily match the amounts actually paid to Mrs. Curry.

25The following income was allocated to Mrs. Curry:

− 2012: $13,731.94

− 2013: $10,777.47

− 2014: $57,227.11

− 2015: $63,106.40

26As stated above, Mr. Boyle indicates that the above only represents half of the taxable capital gains as the other half of the capital gain was considered as the Trust’s income.

27Therefore, in 2015, although Mrs. Curry’s T3 slip form the 2012 trust indicates in box 21 that Mrs. Curry was allocated $126,212.80 of capital gains, only 50% of this amount ($63,106.40) was included in Mrs. Curry’s taxable income and was payable from the Trust to Mrs. Curry.

Findings

(i) To what extent was Mrs. Curry’s income declared in her 2012, 2013, 2014 and 2015 tax returns received from the 2012 Trust and other investments payments to be credited towards equalization payment from Mr. Curry?

28The Court finds that the income allocated to her from the trust was received by her in 2012 and 2013 and was not credited towards the equalization payment.

29In 2014, the Court finds that Mrs. Curry received $57,227.11 from the Trust in 2014 which was credited to her as an equalization payment.

30In 2015, the Court finds that Mrs. Curry received $63,106.40 from the trust and this was credited towards the equalization payment.

31Those amounts received in 2014 and 2015 which were credited will be deducted from Mrs. Curry’s income for the purpose of determining support.

32Therefore, even though Mrs. Curry’s T3 trust tax slip indicated a higher amount, only the taxable portion of the capital gain was payable to the beneficiaries each year. This fact will be reflected in the SSAG calculations below. The non-taxable portion of the trust’s capital gains was reinvested in the trust’s investment portfolio.

(ii)Did Mrs. Curry declare income in her 2012, 2013, 2014 and 2015 tax returns from the 2012 Trust or other investments even though she did not actually receive this income?

33Upon reviewing the evidence including the experts’ reports, the Court finds that Mrs. Curry did not declare income that she did not receive.

34However, she did receive interest income from Mr. Curry that represents her half share of interest earned from the promissory note. Therefore, the amounts of $7,671 in 2014 and $1,244 in 2015 were received by Mrs. Curry and these amount will be grossed up for tax purposes in the SSAG’s when determining support.

(iii) Did Mr. Curry receive monies from the 2012 Trust or other investments that should have been declared in his T1 General Return?

35The Court finds that Mr. Curry received interest income from the payment of the Promissory note from the trust which was declared in his tax returns.

2012

Mr. Curry’s Income

36Mr. Curry originally indicated that his income was $270,168. Upon further questioning from the Bench, he agreed that the 2012 Notice of Reassessment indicated that he earned more than this amount. He submits that his income was $306,000 in 2012. He indicates that he is entitled to deduct carrying charges and interest expenses

37Mrs. Curry submits that his income was $325,540 which is the amount shown in the Notice of Assessment.

38I find that for 2012, Mr. Curry’s income was $305,602 for the purposes of determining support. His income consists of the following as reflected in his tax documents:

− Employment income : $275,103;

− Taxable Dividends $1,581;

− Interest and other investment income : $14,750; and

− Additional T5 and T3 income $35,434 (which was not in his original tax return but reflected in his Notice of Reassessment for 2012)

39Pursuant to Schedule III of the Guidelines, the parties may deduct carrying charges and interest expenses in the amount of $20,831 for the purpose of determining support.

40In her SSAG calculations, Mrs. Curry allocates the amount of $29,679 (with automatic gross up) to Mr. Curry.

41In her affidavit on p. 4, she states that for the years 2012 and 2013, any income distributions from the trust were not credited towards the equalization payment.

42Mrs. Curry states that the income allocations from the Trust were received by her and were reported in her tax returns. There was no credit against equalization payment. This is confirmed by Mr. Boyce at p. 2 of his report.

43Therefore, it is not appropriate to allocate income to Mr. Curry for “income allowed to Mrs. Curry”.

Mrs. Curry’s income

44Mr. Curry indicates that Mrs. Curry’s 2012 annual income was $26,650. Mrs. Curry indicates that her income was $18,225.

45Her tax return shows the following:

− Employment income of $7027;

− Taxable CDN dividends $33,778;

− Interest and other investment income of $1,537;

− Other taxable income of $106; and

− Other deductions of $129.

46She is permitted to deduct union dues of $138 and carrying charges of $6,359 pursuant to Schedule III of the Guidelines.

47The difference between the parties in their respective SSAG calculations is that Mrs. Curry deducts $8,426 as income that she alleges was diverted. This is not supported by the evidence as her affidavit and the expert’s reports confirm that any income allocated to her from the trust was received by her and was not credited towards an equalization payment in that year.

48Accordingly, her income for the purposes of determining support is $26,650.

Support payable

49According to the SSAG calculations and assuming Mrs. Curry is to receive 60% of the Net Disposable Incomes (NDI) as per the trial decision, Mr. Curry should have paid from July 2012 to the end of December 2012 the amount of $5,872 per month as child support ($35,232) and $3,624 ($21,744 for 6 months) per month as spousal support for a total of $56,976.

50Since the parties are not availing themselves of tax treatment on the spousal support payments, the court will use the mid-point of the after tax cost/benefit for spousal support. This means that the Court will use the figure of spousal support that represents the mid-point between the after tax benefit of support that Mrs. Curry’s would have received if she had to declare the spousal support and the after tax cost to Mr. Curry had he been able to deduct the spousal support. Hence, if the mid-point after tax cost/benefit for spousal support had been paid, Mr. Curry should have paid $2,505 per month for 6 months which totals $15,030. (See Charron v. Carriere 2016 ONSC 7523).

51Accordingly, in 2012, the total amount of support owed by Mr. Curry was $35,232 for child support and $15,030 for spousal support for a total of $50,262.

Amount paid

52Pursuant to my trial decision at para. 239, Mr. Curry was deemed to have paid $78,165.

Underpayment/Overpayment

53Therefore, Mr. Curry overpaid $27, 903 ($78,165 - $50,262).

2013

Mr. Curry’s Income

54The parties agree that Mr. Curry’s income was as follows:

− Employment income of $283,236;

− Interest and other investment income: $20,347;

− Actual capital gains: $18,164;

− Other taxable income (reassessment) $35,815; and

− Minus carrying charges of $21,665

55The parties do not agree on the actual CDN dividends received. Mr. Curry says it was $22,286 and Mrs. Curry says it was $22,171. The Court finds that the amount of $30,740 was declared in eligible amount of dividends as indicated in the tax return.

56Mrs. Curry requests that $45,826 be attributed to Mr. Curry for income that he received but was not reported. There is no evidence before me that Mr. Curry received income that was not reported. Both expert reports confirm that he only received interest payments from the Trust and they were reported in his tax returns.

57Accordingly, his income for the purposes of determining support was $366,637.

Mrs. Curry

58Mrs. Curry’s tax return shows the following incomes:

− Taxable amount of dividends: $32,202;

− Taxable amount of dividends other than eligible dividends: $4,817;

− Interest and other investment income: $4,007;

− Other taxable income $381; and

− Other deductions of $14,560.

59Mr. Curry has added $13,732 as “interest equivalent payment from 2012 trust”. The Mason report indicates that Mrs. Curry received additional distributions of trust capital in the amount of $761 and $1,244 on May 22, 2015 which were not taxable and represented Mr. Curry’s after-tax interest income form the trust for 2014 and 2015 taxation years.

60Mr. Curry states that he provided her with ½ of the interest payment for 2012 and 2013. There is no evidence of this on the record.

61According to Mr. Mason’s report of February 2017, Mr. Curry declared interest income on his tax return each year:

− 2012: $14,508

− 2013: $15,000

− 2014: $15,000

− 2015: $2,506.85

62At page 2 he states:

“A part of the calculation to normalize income between Mr. and Mrs. Curry, additional distributions of trust capital in the amount of $7671 and $1244 were made to Mrs. Curry on May 22, 2015. These amounts were estimated to be equal to Mr. Carry’s after-tax interest income form the trust for the 2014 and 2015 taxation years. Distributions of trust capital are not taxable and are not required to be reported on the recipient’s tax return.

63Therefore, the amount of $13,732 should not be reflected in Mrs. Curry’s income for the purposes of determining support.

64Union dues of $138 and carrying charges and interest expenses of $6,523 are appropriate deductions under schedule III of the Guidelines.

65The amount of $10,777 deducted by Mrs. Curry in her SSAG’s is not supported by the evidence. The expert reports confirm that she did not report income in her 2013 tax return that was not received.

66Accordingly her income for the purposes of determining support is $29,886.

Amount payable

67Mr. Curry should have paid $6,958 per month as child support ($83,496 for the year) and $4,895 per month as spousal support ($58,740 for the year) to ensure that she received 60% of the NDI for a total amount of $142,236.

68As per para. 225 of my decision, the Court found that he paid $5,329 per month as child support ($63,948 for the year) and $4,203 per month as spousal support ($50,436 for the year) totaling $114,384.

Underpaid or overpaid

69Accordingly, he underpaid child support in the amount of $83,496 - $63,948 actually paid. The underpayment is $19,548.

70He paid $4,203 per month. The mid-point after tax cost/benefit of spousal support is $3,076 per month. This totals $36,912 for the year.

71He should have paid mid-point after tax cost/benefit in the amount of $3,462 per month or $41,544 for the year.

72He underpaid spousal support $4,632.

2014

Mr. Curry’s income

73The parties agree the following income should be included:

− Employment income of $445,943;

− Interest and other income $24,234;

− Actual capital gains received $11,939 and

− Deduct Carrying charges of $24,046

74The 2014 T1 person income tax return shows:

− Taxable CDN dividends of $32,100 and

− Other taxable income of $583.

75In her SSAG’s, Mrs. Curry adds the tax free amount of $131,343 to Mr. Curry’s income alleging that he received funds that were not reported in his tax return. This allegation is not supported by the evidence of the two expert reports.

76Therefore, for the purposes of determining support, Mr. Curry’s income is $495,009 per annum.

Mrs. Curry’s Income

77The parties agree that the following is her income for 2014:

− Employment income of $215;

− Interest and other investment income $6,151;

− Deduction for Carrying charges of $31,434; and

− Deduction for Union dues of $154.

78Her 2014 tax return shows the following:

− Taxable capital gains of $49,882;

− Taxable amount of dividends (eligible and other than eligible) of $32,855; and

− Other taxable income $542

79To Mrs. Curry’s income should be added a non-taxable amount consisting of the amount of payment representing half of the interest payment of $7,671 which was a capital amount received from the trust as stated in the two experts’ reports.

80An amount of $57,277 must be deducted from her income as this was an advance on an equalization payment.

81Accordingly, Mrs. Curry’s 2014 income for the purposes of determining support is ($12,100).

The amount payable

82Child support should have been paid at $9,243 per month for 4 children (annual amount of $110,916) and spousal support of $6,457 per month (the annual amount of $77,484)

Amount underpaid or overpaid

83Mr. Curry paid $5,329 (annual total of $63,948) per month plus a lump sum of $36,000 for a total of $99,948. He owes retroactive child support in the amount of $10,968.

84He paid $4,203 per month as spousal support ($50,436) which is a mid-point of after-tax/cost benefit of $2,893.50 per month = $34,722

85The mid-point of after-tax cost/benefit of spousal support should have been $4,043 per month which is $48,516 and hence the underpayment is $13,794.

2015

Mr. Curry’s income

86Both parties agree and the tax return shows Mr. Curry’s income as follows:

− Employment income of $647,848;

− Interest and other investment income of $21,578;

− Other taxable income of $751; and

− Deduct carrying charges and interest expenses of $25,773

87Mr. Curry’s tax return shows $31,622 as taxable CDN dividends;

88There is no evidence of diverted income or income not reported as per the experts’ reports.

89Therefore, his income for the purposes of determining support is $692,245.

Mrs. Curry’s income

90They both agree and it is reported on her tax return:

− $2,171 employment income;

− Other taxable income $323;

− $48,328 for carrying charges; and

− Deduction of $189 for union dues as per Schedule III of the Guidelines.

91On her tax return:

− Dividends CDN (all) $20,800

− $8,547 as interest and other investment income; and

− Actual capital gains $55,220

92She also received a non-taxable capital amount from the trust of $1,244 which represented ½ of the net interest received by Mr. Curry from the trust on the promissory note.

93There is no evidence to deduct $102,670 from her income. She only declared $55,220 although the T3 Trust slip allocated more. As discussed above, the other half was placed in the trust and the trust paid the taxes.

94The amount of $63,106 must be deducted from her income which represented an advance of equalization payment.

Amount payable from January 1, 2015 until end of Sept 2015 for 4 children

95In the first nine months of 2015, Mrs. Curry had four dependent children in her care.

96The amount payable to ensure that Mrs. Curry received 60% of the NDI is $12,754 per month as child support for four children (totaling $114,786).

97The appropriate amount for spousal support is $9,689 per month.

Amount payable from October 1, to end of December 2015 for 3 children

98In the last three months of 2015, Mrs. Curry had three dependent children in her care.

99Mr. Curry should have paid $10,419 per month as child support for three months ($31,257).

100The appropriate amount owing for spousal support is $14,369 per month.

Underpayment/Overpayment

101He paid $5,329 for 6 months ($31,974), $6,039 for 6 months ($36,234) and lump sums of $39,665.15, $4,260, $5,651.43 and $3,445.94. For a total amount of $121,230.37.

102Therefore, he underpaid child support by $114,786 + $31,257 - $121,230.37 = $24,812.63.

Spousal support

103He paid $7,300 per month for the year ($87,600). The mid-point of after tax cost/benefit is $4,699 = $56,388 for the year.

104For the first nine months, he should have paid spousal support in the amount of $9,689 per month. The mid-point after-tax cost/benefit would be $5,948.50 per month = $53,536.50

105For the last three months, he should have paid $14,369 and the mid-point would have been $8,370.50 x 3 = $25,111.50

106He paid $56,388 as mid-point after tax cost/benefit in spousal support and should have paid $78,648. He owes $22,260 for 2015 spousal support.

Summary

1072012: Mr. Curry overpaid $27,903.

1082013: Mr. Curry underpaid child support $19,548.

1092013: Mr. Curry underpaid spousal support $4,632.

1102014: Mr. Curry underpaid child support $10,968.

1112014: Mr. Curry underpaid spousal support $13,794

1122015: Mr. Curry underpaid child support $24,812.63

1132015: Mr. Curry underpaid spousal support $22,260

114Total of $68,141.63 must be paid within 30 days.

115The issues of income and the determination of retroactive support are very complex. This is as a result of creative accounting and tax planning created by Mr. Curry with the assistance of his accountant. In order to minimize taxes and generate income, the trust generated income by way of interest and capital gains. The designation and attribution and monies shown in T3 slips were completed resulting in the complex SSAG calculations. The financial issues were not straightforward nor were they presented in comprehensive manner until the court received the two expert reports.

116Neither party had accurate numbers in their respective SSAG’s regarding incomes. This hearing was required because the parties had failed to provide me with the proper evidence to determine income.

117Accordingly, I am not inclined to order costs. However, if the parties wish to pursue costs, then Mr. Curry’s two page submissions are due on September 8, 2017 and Mrs. Curry’s two page submissions are due on September 15, 2017.