Court File and Parties

Court File No.: 579-06 Date: 2018-04-04 Ontario Superior Court of Justice

Between:

Joan Ann Mary Fox Applicant

– and –

James Henry Fox Respondent

Counsel: John G. Cox and Natalie Bazar, counsel for the applicant Douglas R. Beamish, counsel for the respondent

Heard: March 28, 2018

Before: Justice N. Mossip

Additional Reasons for Judgment

[1] There were four issues that arose out of my Reasons for Judgment dated, October 31, 2017. Counsel agreed the issues were as follows, and made submissions at the hearing on them.

Commencement date of adjusted support order.

[2] The parties agreed that arrears of support, from January 1, 2006 going forward, was an issue for the trial judge. Ms. Fox’s counsel submitted that I was “mistaken” when I ordered the adjusted support to commence as of the date of the Application, July 1, 2006 because of the Agreed Statement setting out the January 1, 2006 date. At the time this argument was made, I pointed out to counsel that, as far as I was concerned, my Reasons were clear. I intended the adjusted support to commence the same date as the Application was commenced, and not any earlier. Applicant’s counsel agreed I had the authority to make such an order based on the evidence and submissions at the trial. Counsel did not pursue this issue any further at the hearing.

Pre-judgment interest on support.

[3] Counsel for the parties filed calculations setting out the pre-judgment interest owing on the lump sum adjusted support ordered by me. The parties were $3,748 apart in these calculations prepared by the parties’ experts. Following discussions in court, at the time of the hearing, it was unclear to me and counsel, what the evidentiary basis for the $3,748 difference was. After a brief recess, the parties agreed to “split the difference” and agreed that the total pre-judgment interest owing was the sum of $60,412.

The net after tax spousal support owing by Dr. Fox to Ms. Fox.

[4] In para. 212 of my Reasons for Judgment, the parties were directed to re-calculate the DivorceMate tables, from July, 2006 to June 30, 2016, taking into account the inputs I set out in that paragraph. Based on these re-calculations, the parties arrived at a gross figure of $1,802,259 as the underpayment of spousal support.

[5] In para. 213. The parties were directed to deduct certain amounts from the above lump sum. The only item the parties could not reach an agreement on was “a fair and reasonable deduction for tax consequences”, because that payment will have no tax implications to Dr. Fox or Ms. Fox.

[6] The parties each retained experts to calculate the “fair and reasonable” tax consequences to each of the parties of the lump sum support owing pursuant to my Reasons.

[7] After all of the hard work of these experts, the experts were only $29,000 apart. Ms. Fox’s expert concludes that Dr. Fox owes Ms. Fox $695,000. Dr. Fox’s expert concludes the number is $666,000.

[8] There is no dispute that the basis for the difference between the numbers is that Ms. Fox’s expert did not take into account the tax deduction for legal fees that she took each year to reduce her taxes owing, in calculating her tax consequences. Dr. Fox’s expert included the tax deduction for legal fees in calculating her tax consequences. There is also no dispute that Ms. Fox actually took this tax deduction in each year that she was entitled to do so.

[9] Ms. Fox’s counsel submits that the legal fees should not be deductible in calculating her tax consequences, because to do so would indirectly benefit Dr. Fox for his conduct in not paying the proper spousal support.

[10] Dr. Fox’s counsel submits that his valuator did exactly as I ordered, and calculated the actual net disposable income (“NDI”) of the parties, based on the parties’ incomes adjusted by my Reasons, and accounting for the tax deductions actually utilized by the parties. If I accede to the applicant’s calculation, I am accepting a hypothetical scenario, which results in Ms. Fox ultimately having a higher NDI.

[11] Counsel for the applicant provided a decision in which the trial judge factored in the parties tax consequences by taking a balanced approach. The judge considered the allowance for the amount the recipient spouse “might have achieved” if the support had been paid. Counsel’s position is that if Dr. Fox had made the payments he should have made, Ms. Fox would not have had to expend legal fees to collect same.

[12] As compelling as that argument is, I ordered otherwise in my Reasons for Judgment. I cannot readjust the conclusion I came to in those Reasons.

[13] My Reasons stated that a “fair and reasonable” tax consequence for the parties was to result in the actual NDI of the parties being equal during the period the adjusted support was to cover. This results in the actual tax deductions, taken by the parties, being included when calculating the NDI of the parties.

[14] Accordingly, the net amount owing by Dr. Fox to Ms. Fox is $666,000.

Ms. Fox’s lost RRSP savings.

[15] Ms. Fox claims Dr. Fox owes her an additional $146,446. According to her expert’s report, this sum represents the lost tax savings of the unused contributions to her RRSP ($90,513), plus lost interest on this amount at a rate of 4% per annum ($55,933). This is the amount Ms. Fox could have contributed to her RRSP, based on the adjusted spousal support I ordered.

[16] This claim cannot succeed.

[17] I accept that Ms. Fox sought an order that Dr. Fox contribute to her RRSP in her application. That is very different than the claim now being made which, is based on speculation and hypotheticals and was not advanced at the trial.

[18] There was simply no evidence by Ms. Fox at the trial as to what, if any, RRSP contributions she might have made if she had received spousal support as I ordered. Nor was there any evidence that the maximum contributions would have been made every year, when considered with her other expenses.

[19] I do not accept that this claim can be captured under the calculation of a recipient’s “net after tax”, by taking into account what Ms. Fox might have achieved, as the trial judge did in, Patton-Casse v. Casse, 2011 CarswellOnt 11048, referred to by counsel for Ms. Fox.

[20] Further, the calculation of the net lump sum payment owing to Ms. Fox would be completely different if the hypothetical RRSP contributions had been factored into Ms. Fox’s taxes owing. Dr. Fox’s expert did not do so, as he made the correct interpretation from my Reasons. The intention was to ensure the parties had equal NDI’s. The experts had to take into account the deductions actually taken by the parties, not hypotheticals.

Costs

[21] As I discussed with counsel at the time of this hearing, the parties should try to work out the issue of costs to ensure they do not incur any further legal fees. Costs are discretionary. Neither of the parties can be sure how the Court will view the issue of costs; certainly there is little liklihood I will view this issue exactly the same as they do.

[22] If the parties are unable to agree on an amount, or who should pay costs, I would ask them to make an appointment, through the trial office, to make oral submissions before me. The parties should at the hearing give me any offers to settle. The Bill of Costs, should exclude any time/disbursements for motions or conferences for which costs were already ordered, or where costs were not reserved.

[23] The costs’ hearing should be scheduled to be heard prior to May 1, 2018. If not, there will be a significant delay in this issue being decided, as I have a lengthy trial commitment, outside of the Guelph courthouse, which commences May 7, 2018.

“Justice Mossip”

Justice Mossip

DATE: April 04, 2018