Court File and Parties
COURT FILE NO.: FS-19-96679 DATE: 2022 09 09
ONTARIO SUPERIOR COURT OF JUSTICE
BETWEEN:
Piotr Jasiobedzki Applicant
– and –
Ewa Jasiobedzka Respondent
COUNSEL: Sasha Farone, for the Applicant Andrea Clarke, for the Respondent
HEARD: January 18, 19, 20 and 21, 2022
SUPPLEMENTARY REASONS FOR JUDGMENT AND COSTS ENDORSEMENT
Chozik J.
[1] A trial in this matter proceeded before me in January 2022. In Reasons for Judgment, dated March 24, 2022, I invited the parties to make additional written submissions in respect of the following issues: (i) the amount of retroactive spousal support owing from fall of 2017 until January 6, 2020, payable as a lump sum; (ii) the tax implications of that lump sum retroactive spousal support award, (iii) the tax implications of a lump sum “catch up” payment the Applicant (“Husband”) owed the Respondent (“Wife”) for the period of January 7, 2020 to March 31, 2022, and (iv) costs of the trial.
[2] I have now received and reviewed the written submissions of the parties in respect of these issues.
Background:
[3] In the Reasons for Judgment, I concluded that the Wife was entitled to retroactive spousal support. She was entitled to retroactive spousal support from the date of formal notice of her claim (January 6, 2020) to the date she gave effective notice of her claim. I found that the effective notice of her claim was in the fall of 2017. At para. 80 of the Reasons for Judgment, I asked the parties to agree or make submissions in respect of the exact date of effective notice.
[4] At para. 84, I directed counsel to calculate and agree or make submissions about the amount of retroactive support owing for that time period based on the evidence at trial regarding the Husband’s line 150 income in 2017, 2018 and 2019 using mid-range SSAG calculations. In para. 85 and 86, I directed counsel to agree or make submissions in respect of the net amount of the payment I should order bearing in mind any tax consequences for the lump sum retroactive spousal support award.
[5] The date of the effective notice of the spousal support claim was a conversation the parties agreed they had in the fall of 2017. Neither testified at trial as to the date of that conversation. The Wife now proposes that I use September 19, 2017 (which I presume is the start of “fall”) for the calculations, while the Husband proposes that I use November 1, 2017 because it is the mid-point for the official fall season.
[6] The parties separated on April 5, 2015. Until March 10, 2020 the Husband provided informal support by allowing the Wife to continue to use money for her needs from a joint bank account to which he contributed his salary. After trial, I found that the amount of informal support the Wife received from April 5, 2015 until March 10, 2020 was $144,609.
[7] In March 2020, the Husband started paying formal monthly spousal support of $5,000. After trial, I found that the Wife was entitled to mid-range monthly support of $5,979. Therefore, I found that the Husband owed the Wife $36,433 as a “catch-up” spousal support payment for the period from January 7, 2020 to March 31, 2022. At para. 52 of the Reasons for Judgment, I invited counsel to address the tax consequences, if any, of this lump sum “catch up” payment in their written submissions if they could not agree on the issue.
Positions of the Parties:
[8] The Wife calculates the total retroactive support owed her by the Husband for 2017, 2018 and 2019, based on his line 150 income and a mid-range SSAG calculation, to be $152,508. This amount is calculated for the period September 19, 2017 to January 6, 2020. She argues that this amount should be offset by the informal support she received during that time frame, which she calculated, based on the actual amounts she received, to be $62,367. Therefore, she submits that $90,141 is owing to her as retroactive support.
[9] The Wife submits that no tax deduction should be permitted to the Husband in respect of the lump sum retroactive payment or the “catch up” payment because spousal support is taxable in her hands. Both parties can apply to have prior years’ taxes reassessed by the Canada Revenue Agency. So long as the court order specifies the time period prior to the date of the court order to which the retroactive lump sum applies, the Canada Revenue Agency will adjust each party’s taxes accordingly. A letter from an accounting professional and case law provided by the Wife supports this position. The Husband also agrees that a re-assessment is available.
[10] The Wife’s calculations can be summed up as follows:
Retroactive Support:
September 19, 2017 to December 2017 = $18,991
January 2018 to December 2018 = $66,684
January to December 2019 = $65,676
January 2020 (6 days) = $1,157.22
Total retroactive support: = $152,508
Less Informal Support : = $62,367
Retroactive Lump Sum Support Owing: $90,141
[11] The Husband submits that the before tax support payments should have been as follows:
In 2017: $5,641 per month
In 2018: $5,557 per month
In 2019: $5,473 per month
[12] Based on these figures, it appears that the total he says he should have paid (though no total was provided in the submissions) is $143,642. Although his submissions are silent on this point, I take that he does not dispute that he also owes support for the six days in January 2020 claimed by the Wife.
[13] The Husband argues that on average, he paid $2,451 per month in informal support. He calculates this as follows: $144,609 / 59 months = $2,451. He agrees that the total amount of the retroactive support should be offset by the informal support he paid. However, he argues that the off-set amount should be the after-tax cost to him and the after-tax benefit to the Wife of the informal support, which he submits totals $38,676. This retroactive payment, he submits, would receive no tax treatment – it would not be taxable in the Wife’s hands or tax deductible to the Husband. Alternatively, he asks the court to accept a before-tax calculation of the retroactive spousal support as $64,472 (as compared to the Wife’s $90,141.)
[14] In respect of the “catch up” payment, the Husband argues that he ought to pay an after-tax amount of $17,604 of the $36,433 “catch up” amount I ordered.
Analysis:
Retroactive Support for the Period of “Fall” 2017 to January 6, 2020:
[15] I found that the Wife was entitled to mid-range support based on the Husband’s line 150 income retroactive to the fall of 2017. The calculations now submitted by the parties appear to agree in respect of how much the Husband should have paid for 2017, 2018 and 2019, although they set it out differently.
[16] I am prepared to use November 1, 2017 as the “fall” mid-point date as the effective date of notice of the spousal support claim. In the absence of any evidence as to the actual date, this is fair. Using this date, the calculations of the retroactive support the Husband should have paid is as follows:
2017 (2 months): $5,641 x 3 = $11,282
2018: $5,557 x 12 = $66,684
2019: $5,473 x 12 = $65,676
2020: (6 days): $ 1,157
Retroactive Support Owing: $144,799
[17] The parties agree that the total retroactive amount owing should be off set by the amount of informal support the Wife received during the same time period. The husband argues that the informal support paid was $63,726. The Wife argues that it was $62,367.
[18] They arrive at those figures differently. Neither approach is wrong. Whether I use the average monthly amount of informal support of $2,451 as proposed by the Husband or the Wife’s actual figure based on her re-examination and recalculation of the bank records and expenses makes only a slight difference.
[19] Using the monthly average, the total informal support the Wife received works out to be slightly more than $63,367 ($2,451 x 26 months = $63,726 plus 6 days in January). Using the Wife’s actual calculations, the total informal support she received works out to be slightly less that $62,367 because her calculation needs to be adjusted to reflect an effective notice date of November 1, 2017 not September 19, 2017. Neither is a perfectly accurate number, but merely an estimate of the informal support the Wife received.
[20] I am prepared to off-set the amount of retroactive support owing ($144,799) by the Wife’s re-calculation of the actual support she received, less one and a half month’s worth to account for November 1, 2017 (not September 19, 2017) as the effective date. The Husband did not challenge the accuracy of the Wife’s re-calculation of the informal support she actually received. Therefore, the off-set amount is $58,691 ($62,367 - $3,676 ($2,451 x 1.5 months) = $58,691)
[21] Therefore, I find that the retroactive support owed by the Husband to the Wife is $86,108 ($144,799 less $58,691).
[22] I agree with the Wife’s submission that no deduction for taxes should apply to the retroactive lump sum spousal support payment. Rather, the parties shall submit a request for reassessment to the Canada Revenue Agency. A large lump sum retroactive top-up payment can be deducted by the Husband where it can be identified that the lump sum payment is paid pursuant to a court order that establishes a clear obligation to pay retroactive periodic maintenance for a specified period prior to the date of the court order: James v. The Queen, 2013 TCC 164 at paras. 28-29. The Husband and Wife can apply to assess and readjust prior years’ taxes by completing Form T1198.
[23] I also do not accept the Husband’s submissions that the amount of informal support at this point should be calculated having regard to the before and after-tax consequences. I did not invite submissions in this regard, and rejected this argument already at trial.
Tax Consequences of the “Catch Up” Payment:
[24] In the Reasons for Judgment, I found that the Husband ought to pay on-going monthly spousal support of $5,979 based on the Husband’s 2020 income of $156,255 and the Wife’s income of $0. I found that he owed the Wife a “catch up” payment of $36,433.
[25] As above, I agree with the Wife’s submission that no deduction for taxes should apply to the “catch up” payment. The parties shall apply to the Canada Revenue Agency for a reassessment in respect of this amount.
Order:
[26] In conclusion, the Husband shall pay to the Wife a one-time lump sum retroactive spousal support payment of $86,108 for spousal support owing for November 1, 2017 to January 6, 2020. He shall pay to the Wife a one-time “catch up” payment of $36,433 for spousal support owing from January 7, 2020 to March 31, 2022. The parties shall complete T1198 forms and submit to the Canada Revenue Agency for reassessment for 2017, 2018, 2019, 2020, 2021.
[27] The parties agree that the retroactive support payments be paid from the Husband’s share of the proceeds from the sale of the matrimonial home, held in trust. The Husband’s ongoing spousal support payment obligation shall be secured by way of sufficient life insurance with the Wife as the irrevocable beneficiary. There shall be an Order that both parties complete the T1198 forms and submit to the Canada Revenue Agency.
Costs of the Trial:
[28] The Wife submits that her total costs of the trial, and the supplemental submissions, was $45,765.80. On a substantial indemnity basis, she seeks $34,324.35, or $27,459.48 partial indemnity. Her position assumes that she was the successful party.
[29] The Husband claims that he was successful at trial and is entitled to costs. He seeks costs in the amount of $30,000. He submits that he is entitled to costs because he was successful in respect of the division of his pension and “mostly successful” on the issue of spousal support. He relies on an Offer to Settle dated January 14, 2022.
[30] I do not accept that the Husband is entitled to costs. He was not “mostly successful” on the issue of spousal support. His position at trial was that spousal support terminate at his retirement, which he intended to take as soon as the trial was finished. I rejected his position and ordered him to pay spousal support indefinitely. The duration of support was a key issue between the parties, and clearly the Husband was not successful on this very important issue.
[31] After trial, I found that this was a traditional 38-year marriage. The parties are both in their sixties. The Wife was, and continues to be, entirely financially dependent on the Husband. Due to her long-term financial dependence and significant mental health issues, I concluded that the Wife was unable to become self-sufficient. In my view, the Husband’s position that his spousal support obligation terminate at his retirement was not reasonable in the circumstances.
[32] The Husband was also unsuccessful in his argument that income ought to be imputed to the Wife. He was not successful in his claim for occupation rent, which he chose to pursue at trial.
[33] The Husband was successful in terms of the quantum of support: he argued for mid-range support, while the Wife argued for high-range support. I note that the Wife did not strenuously argue in favour of high range support. The duration of support was the contentious issue.
[34] The Husband was not successful on the other key issue: retroactive support. The Husband argued that none was payable. He argued that the informal arrangements the parties had prior to the Answer being filed were sufficient to meet his spousal support obligations. I rejected his position. I also rejected his calculation of the informal support he had paid.
[35] I accepted the Wife’s position that she was entitled to retroactive support, though not to the date of separation in April 2015. I ordered the Husband to pay $86,108 in retroactive spousal support whereas his trial position was that the Wife was entitled to $0. His offer to settle was for $75,000, but covered an additional twenty-four months period to the end of January 2022. I found that the Husband owed an additional “catch up” payment for a portion of that additional time frame. Overall, the Husband was not successful on the issue of retroactive spousal support, nor was success on this issue truly divided.
[36] Whether or not the Husband’s pension should be divided at the time of separation or retirement was not a significant issue at this trial. It required no evidence or submissions. No legal authorities were presented. It does not tip the balance, or even make any impact, as to success at this trial.
[37] I rejected all of the Husband’s claims about the after-tax costs or benefits of the various payments made or owing. A significant expenditure of time, effort and resources was spent on these unsuccessful arguments at trial.
[38] The result the Wife obtained at trial was clearly more favourable to her than the Husband’s Offer to Settle. The Offer to Settle provided for spousal support to continue only so long as the Husband worked – a position I did not accept at trial. It also provided for $75,000 to be paid to the Wife as retroactive spousal support until January 31, 2022. As I have already explained, this is significantly less than what I concluded the Wife was entitled to.
[39] As a result, I do not accept that the Husband was successful at trial or that he is entitled to any costs. Having regard to the overall outcome, the Wife was clearly the successful party at trial. She is presumptively entitled to her costs.
[40] I am satisfied that fair, reasonable and proportionate costs in this case are $30,000. This is the amount the Husband sought. It is the mid-range of what the Wife sought. It is commensurate with the significance and complexity of the issues, and the length of this trial.
[41] The Husband shall pay costs of $30,000 to the Wife forthwith.
Chozik J.
Released: September 9, 2022
COURT FILE NO.: Brampton FS-19-96679 DATE: 2022 09 09
ONTARIO SUPERIOR COURT OF JUSTICE
BETWEEN:
Piotr Jasiobedzki Applicant
-and-
Ewa Jasiobedzka Respondent
REASONS FOR JUDGMENT
Chozik J.
Released: September 9, 2022