Quantum of Spousal Support & Equalization Payment Appeal: Berta v Berta
Berta v Berta, 2015 ONCA 918
The Appellant wife and Respondent husband married in December 1982. They separated after 27 years of marriage in March 2010. Following the wife's retirement during the marriage, the husband started his own business in 1986, ACCE Inc., of which the parties were equal shareholders and served as the company's directors.
When the parties separated in March 2010, they had two principal assets: the matrimonial home and their shares in ACCE. Soon after, the matrimonial home was sold and the proceeds divided equally. Then in 2012, the husband purchased the wife's ACCE shares for $2.2 million.
In August 2014, following a nine-day trial, the judge ordered:
- The wife to pay an equalization payment to the husband;
- The husband was to pay indefinite periodic spousal support to the wife based on the parties' imputed incomes; and
- The wife was to pay full indemnity costs to the husband.
On appeal, the wife argues that the trial judge erred in:
- Determining the parties imputed incomes such that the amount of her period spousal support award was incorrect;
- The equalization analysis by valuating the wife's notional disposition costs of her ACCE shares at $0.00; and
- Awarding costs on a full indemnity basis in the husband's favour in the circumstances.
The wife was partially successful in her appeal.
The Determination of the Parties' Annual Incomes for Spousal Support
The Husband's Income
With respect to the husband's income, the wife claimed that the trial judge understated the average husband's income in his analysis and thus erred in the income imputation for support purposes. The husband had submitted an expert's calculation of his annual income and the Court found that it was open to the trial judge to use and rely on said calculation in light of the evidentiary record at trial.
Furthermore, where the wife was requesting a different imputation of income calculation for the husband, she had the onus at trial to establish the evidentiary foundation for her requested calculation method. The Court of Appeal found that she had failed to do so, and as she did not demonstrate an overriding and palpable error in the trial judge's calculation of the husband's income, her claim in this regard was dismissed.
The Wife's Income
The wife raised three grounds of error in the trial judge's calculation of her income. However, the Court of Appeal's analysis focused only on her that the trial judge failed to reveal the basis and justification for his imputation of the wife's annual income to be approximately $480,000.
Upon review of the evidence, the Court of Appeal held that trial judge's income imputation was erroneous for the following reasons:
- The trial judge reasons for the imputation were insufficient as he merely stated that he "found [the wife's] income to be as follows: $484,356, which includes pension and investment income";
- The trial judge failed to indicate the amounts of pension and investment income used in his imputation analysis;
- The trial judge's reason were silent as to the basis for the quantum of income he imputed to the wife and why it was appropriate in the circumstances; and
- The trial judge in his analysis indefinitely attributed an annual income of $484,356 to the wife without justification or basis in the evidentiary record.
Thus, the trial judge's award of indefinite monthly spousal support in the amount of $5,380 was overturned by the Court of Appeal. The appellate Court determined that such an award was a reversible error where there was no explanation or justification set out in trial judge's insufficient reasons.
Notional Disposition Costs of the ACCE Shares
The wife argued that the sale of her ACCE shares to the husband was sufficient evidence to support a value of approximately $364,000 for her Share Disposition costs on the date of separation. Thus, the wife claimed, the trial judge made an error when he assigned a $0.00 value to her notional disposition costs of the shares.
The wife relied on evidence by the accountants originally retained by the husband to assist with structuring his purchase of her shares after separation. As per the accountant's testimony at trial, the wife claimed that the approximate $364,000 difference between the assumed purchase price of her shares and her after-tax proceeds represented her Share Disposition Costs. As such, she asserted that this amount should have been deducted from her NFP according to subsections 4(1) and 4(1.1) of theFamily Law Act.
Upon a review of the evidence and case law, the appellate Court disagreed with the wife's assertion.
At trial, the trial judge framed the applicable test from the Court of Appeal decision Zavarella v Zavarella as:
- What is the reasonable likelihood that the debt will be incurred; and
- What is the reasonable estimate of value?
The appellate court held that the trial judge had applied Zavarella test correcting in coming to his conclusion that a nil value should be assigned to both parties' Share Disposition Costs. The court disagreed with the wife's characterization of the issues as being what would be the reasonable or notional Share Disposition cost for the wife's shares at the time of the transaction in 2012. The appropriate inquiry was whether there was a reasonable likelihood that, as of the valuation date, the wife would sell her shares and, if so, what is the reasonably estimated value the shares would be sold at.
As such, the Court of Appeal upheld the trial judge's assignment of a $0.00 value for the parties' Shares Disposition Cost based on the following reasons:
- The evidence at trial did not address the valuation date value of the Shares Disposition Cost such that it was insufficient for the trial judge to engage in a meaningful assessment of value;
- The only certainty based on the evidence available was that the parties owned equal shares and would have incurred similar disposition costs when they were sold such that there would be no imbalance in the net family properties; and
- Based on the evidence presented, it was open to the trial judge to conclude that the wife had a clear intention to sell her shares as of the date of valuation.
Awarding the Husband Costs on a Fully Indemnity Basis
Generally, an appellate court defers to a trial judge's discretionary cost ruling unless the cost award is plainly wrong or presents an error in principle. Where Rule 24(1) creates a presumption that a successful party is entitled to costs, Rule 24(4) allows for a successful party who has behaved "unreasonably" to be deprived of their costs and/or even be ordered to pay the unsuccessful party's costs.
Furthermore, according to Rule 18(4), a party who makes an offer and obtains an Order "as favourable as or more favourable than the offer" is entitled to full recovery costs from the date of the offer, though the court retains discretion as to whether or not to make a full recovery of costs.
After a review of the circumstances, the Court of Appeal held that the trial judge erred in the costs awards in two ways.
Firstly, the judge made an error in principle. The husband's offer to settle was not "as good as if not better than the outcome at trial" he achieved at trial. The after-tax lump sum spousal support in the husband's offer was equal to 56 months (4.8 years) worth of spousal support at the same monthly rate as the trial judge's award. However, 4.8 years of spousal support is nowhere near the same as awarded the indefinite periodic spousal support, especially in light of the wife's 13 year life expectancy; and
Second, the trial judge mistakenly held that the husband was successful on all material issues. At trial, the husband had asserted that the wife was entitled to spousal support, but the wife was awarded indefinite periodic spousal support. Since the husband was awarded an equalization payment by the wife, success at trial was divided.
In light of the wife's unreasonable behaviour and unsupported allegations of fraud against the husband, the trial judge was permitted to deprive her of costs under Rule 24(4). However, due to the significant misapprehension of evidence by the trial judge in reaching two incorrect findings at trial, the Court of Appeal felt uncertain as how much weight was attached to those findings when the trial judge crafted his costs order. Given these concerns, the Court of Appeal remitted the issue of costs back to the trial judge for reconsideration as he was in the best position to do so.