The case of Gagne v Gagne stands as a reminder about what can happen when a party hides income or is less than forthcoming with their financial disclosure.
The trial judgment, which was appealed to the Ontario Court of Appeal by the Appellant Father, suffered from a number of legal and practical errors. Instead of ordering a new trial, however, the Court of Appeal judges capitulated with the parties and determined that “it was in the best interest of justice to make the best of the record that [was] before [them] and to determine the appropriate levels of support, thereby avoiding the cost and inconvenience of another trial.”
The parties were married for 18 years (and cohabited for a period of 19 years). When they separated in 2007, the Appellant Father was 47 years old and the Respondent Mother was 43 years old. The parties had three children for whom Ms. Gagne had always assumed primary care-giving responsibility: Eric (born August 18, 1989); James (born July 7, 1991); and Sarah (born February 13, 1995).
The parties had a traditional marriage and enjoyed a very comfortable lifestyle; the Appellant was the primary bread-winner and the Respondent was a stay-at-home wife and mother. After suffering an emotional set-back and alcohol dependency following the separation, Ms. Gagne recovered and returned to the workforce as a secretary, earning approximately $45,000 per year.
The separation agreement, made approximately a year and a half after the separation date, on June 15, 2006, provided that Mr. Gagne pay undifferentiated child and spousal support of $10,000 per month for 24 months, to be reviewed de novo after the 24-month period.
The agreement further provided that the amount of support was based on the needs of the respondent mother and the children rather than Mr. Gagne’s “total declared income,” which was stated to be $69,377.21. Though the term “declared income” was not defined, the Court of Appeal held that it clearly did not include the Appellant’s entire disposable income.
According to the agreement, the $10,000 was to cover all extraordinary expenses. Nevertheless, a fund was also established from the net proceeds of the parties’ former matrimonial home for the children’s private school expenses and the Appellant maintained an RESP account with approximately $66,000 for post-secondary education expenses. The parties split the proceeds of sale of their matrimonial home ($1,564,100) and both parties waived their claim to equalization payment.
The Trial Decision
At trial, the court held that, not only had the Appellant misled the Respondent Mother with respect to his income at the time the separation agreement was concluded, but had failed to make adequate disclosure of his income and resources in relation to the review.
However, instead of making findings as to Mr. Gagne’s actual or imputed income, the trial judge adopted what he described as “the compromise” proposed by Ms. Gagne in her trial submissions. The compromise essentially stated the Mr. Gagne continue to pay spousal and child support in the amount specified in the separation agreement (allocated at $2,000 per month for child support, and $8,000 per month for spousal support, respectively).
The one noteworthy modification to the original separation agreement was that Ms. Gagne would pay tax on the spousal support and Mr. Gagne could claim a deduction. The trial judge ordered that s. 7, special and extraordinary expenses for the children, be shared on a 50-50 basis.
Finally, the court ordered the Appellant Father to pay child and spousal support arrears in the amount of $76,084.20 and costs of $52,369.90.
The Appellant Father’s main contention on appeal was that the trial judge had failed to provide sufficient reasons explaining how he determined the appropriate level of support. The trial judge did not, after all, make any findings with respect to the Appellant’s income. The Appellant also submitted that the trial judge erred by failing to determine support de novo (anew) as opposed to on the basis of changed circumstances.
Finally, Mr. Gagne appealed the award for costs.
At the outset, the court, comprised of Justices Sharpe, Rouleau, and Karakatsanis, reprimanded the trial judge for failing to provide a suitable basis for the support orders.
The Court of Appeal could neither understand nor justify the wide gap between the orders for spousal and child support. Most problematic, the trial judge failed to provide reasons for departing from the Child Support Guidelines (legislated) or for declining to consider the Spousal Support Advisory Guidelines. Ultimately, the Court of Appeal was not satisfied that the trial judge provided “an appropriate reasoned basis that [would] service the needs of the parties in the future as the children become adults and in the event the parties’ circumstances change[d].”
Although the Court of Appeal was similarly disappointed with the Appellant Father’s failure to provide adequate financial disclosure, they were not of the opinion that the Appellant’s conduct excused the trial judge’s failure to provide a properly reasoned legal basis for the award he made.
In the end, the Court of Appeal agreed with the trial judge’s conclusion that Mr. Gagne’s income exceeded that revealed by his disclosure. In light of his failure to make accurate full disclosure of his income from a variety of different business ventures, the court imputed an annual income of $250,000 to the Appellant.
On the contrary, the Court of Appeal rejected outright the notion that “the compromise,” which both overvalued spousal support and undervalued child support without reason, provided a proper foundation for the award. Rather, as is appropriate in most instances, the court applied both the SSAG and CSG.
As a result of the Appellant’s failure to make fair disclosure of his resources, the court awarded support at the high end of the range produced by the SSAG. The court also determined that the long-term nature of the marriage (just short of 20 years) as well as the fact that the Respondent Mother had assumed full-time housekeeping and child-rearing responsibilities entitled the Respondent to indefinite support.
The Appellant was ordered to pay $4,071 per month in child support, and $4,597 per month in spousal support ongoing as well as retroactively to July 1, 2008.
Finally, the court rejected Mr. Gagne’s appeal of the cost award and denied leave to appeal costs.