



COURT OF APPEAL FOR ONTARIO

CITATION: Heard v. Heard, 2014 ONCA 196

DATE: 20140317

DOCKET: C56716

MacPherson, Cronk and Gillese JJ.A.

BETWEEN

Catherine Heard

Applicant

(Appellant in appeal)

and

Garry Heard

Respondent

(Respondent in appeal)

James D. Singer, for the appellant

T.G. Reczulski, for the respondent

Heard: February 28, 2014

On appeal and cross-appeal from the order of Justice Peter
    Z. Magda of the Superior Court of Justice, dated February 7, 2013.

By the Court:

[1]

The parties were married on September 18, 1982, and separated on
    November 1, 2009.  There are two children of the marriage: Kaitlyn Heard, born
    on March 4, 1996, and Natalie Heard, born on March 17, 1998.  The children
    reside primarily with the wife, Catherine Heard.

[2]

In the fall of 2011, both parties brought motions in the Superior Court
    to resolve child and spousal support issues, as well as payment of the
    childrens extraordinary expenses under s. 7 of the
Federal
Child
    Support Guidelines
, S.O.R./97-175
. 
    The motions judge ordered the trial of an issue regarding all disputed
    financial issues.  On October 5, 2011, the parties agreed on five issues for
    trial: (1) imputation of income to the husband; (2) child support and apportionment
    of s. 7 expenses; (3) spousal support payable by the wife; (4) property issues,
    including the sale of the matrimonial home and equalization; and (5) financial
    adjustments between the parties.

[3]

The wife appeals from the trial judges ruling regarding equalization of
    net family property and his order that each party bear their own costs of the trial. 
    The husband cross-appeals from the trial judges imputation of income to him
    for the purpose of support and s. 7 expense obligations, and from the trial
    judges dismissal of his spousal support claim against the wife.

A.      Appeal

(1)

Alleged Equalization Errors

(a)

The Limited Partnership Issue

[4]

The wife argues that the trial judge erred in his ruling on equalization
    of net family property by attributing the total post-separation losses
    sustained in a limited partnership investment in First Leaside Securities (the
    LP Investment) to her.

[5]

The wife contends that the LP Investment was treated by the parties as a
    joint asset throughout their marriage and after separation.  In the
    alternative, she submits that she held the LP Investment in trust, before and
    after separation, for the joint benefit of the parties.
[1]
On either basis, she contends that she alone should not bear the post-separation
    losses in the LP Investment (approximately $164,071 (U.S.)), as the trial judge
    held, but rather, such losses should be shared equally by the parties.  Citing
    this courts decision in
Serra v. Serra
, 2009 ONCA 105, 93 O.R. (3d)
    161, the wife maintains that the trial judges treatment of these losses
    produced an unconscionable equalization of net family property.

[6]

We reject these arguments.

[7]

In our view, in the face of the trial judges factual findings, the
    wifes attack on the trial judges treatment of post-separation losses in the
    LP Investment is unsustainable.

[8]

The trial judge considered, in detail, the wifes claim that the parties
    treated the LP Investment as a joint asset throughout their cohabitation and
    following separation.  He also addressed the wifes contention that the LP
    Investment was impressed with a trust in favour of both parties.  In rejecting
    these claims, the trial judge made the following key findings:

1)

at
    all material times, the wife was the sole registered owner of the LP Investment;

2)

the
    wife was not constrained by the husband from dealing with the LP Investment,
    either before or after separation.  The wife controlled the LP Investment and
    was free to deal with it as she saw fit, without interference by the husband;

3)

the
    wife benefited from her ownership of the LP Investment by receiving various
    income tax refunds in respect of claimed losses in the LP Investment both
    before and after separation;

4)

the
    wife acknowledged that she intended to utilize the full value of the LP
    Investment, post-separation, to finance her acquisition of the husbands
    interest in the former matrimonial home; and

5)

when
    the parties were unable to agree on the husbands

support obligations following  separation, the wife unilaterally
    elected to refrain from selling or otherwise dealing with the LP Investment
    until the support dispute was resolved.

[9]

These critical findings were open to the trial judge on this evidentiary
    record.  They are dispositive of the wifes claims that the LP Investment was a
    joint asset of the parties or that it was impressed with a trust in favour of
    both parties.  They establish that the wife had legal title to the LP
    Investment and that she controlled and used it for her own benefit after
    separation.  These facts are inconsistent with the characterization of the LP
    Investment as a joint or trust asset.

[10]

The
    parties spent some time in their submissions on appeal addressing the
    significance of the wifes failure to expressly plead her trust claims
    concerning the LP Investment.  In our view, at this stage, this factor is
    irrelevant.  The trial judge allowed the wife to lead evidence in support of
    her trust claims and the parties had full opportunity to argue the trust issues
    at trial.  In these circumstances, no procedural unfairness arose from the
    pleadings issue.  Further, the trial judge considered the evidence and the
    parties submissions on the trust issues and concluded, on the merits, that the
    evidence failed to establish the trust arrangements alleged by the wife.  This
    was his call to make.

[11]

It
    is true, as the wife emphasizes, that the parties shared equally in the monthly
    funds generated by the LP Investment during their marriage and that the husband
    continued to receive one-half of these monthly funds after separation.

[12]

However,
    this aspect of the parties conduct concerning the LP Investment is not
    determinative of its essential nature.  As the trial judge held, the wifes legal
    ownership of the LP Investment entitled her to deal with it as she saw fit. 
    The evidence at trial, accepted by the trial judge, established that she in
    fact did so by deriving income tax benefits associated with losses in the LP
    Investment both before and after separation, and by unilaterally determining,
    post-separation, when and if the LP Investment would be sold.  Moreover, on her
    own admission, the wife intended to derive exclusive benefit from the LP
    Investment post-separation, by using it to facilitate her purchase of the husbands
    interest in the former matrimonial home.

[13]

Simply
    put, the wifes own conduct in relation to the LP Investment belies her efforts
    to now characterize the LP Investment as a joint or trust asset.

[14]

Nor
    does the wifes invocation of
Serra
assist her.  As the trial judge
    pointed out, at para. 75(b) of his reasons:

In
Serra
, the husband was bound by an order
    prohibiting him from disposing of the business asset.  In the case before me,
    the applicant was never subject to any order restraining her from disposing of
    the FL Partnership investment.  As late as August of 2011, the applicant could
    have sold the investment and received full market value.  From the evidence, it
    was she who, in January 2010, refused to have any further dealings with
    property until support was settled to her satisfaction.  I agree that the
    applicant chose to retain this asset and must suffer the consequences of so
    doing.

We agree.

[15]

This
    ground of appeal fails.

(b)

The Notional Tax Rates Issue

[16]

The
    wife also submits that the trial judge erred in his equalization of net family
    property analysis by applying a notional tax rate of 20.7% to the taxable
    assets of both parties (principally, to the husbands registered retirement
    savings plan and the wifes pension).

[17]

We
    do not accept this submission.

[18]

At
    trial, the wife relied on tax tables prepared by a pension valuator  DSW
    Actuarial  to argue that divergent tax rates (28.4% for the wife and 18% for
    the husband) should be applied to determine the net value of their respective
    taxable assets.

[19]

The
    trial judge disagreed.  He held, among other matters, that there was no
    admissible evidence before him establishing that divergent notional tax rates
    should apply.  We see no error in his ruling on this issue.

[20]

The
    wife led no expert evidence regarding the issue of applicable notional tax
    rates, or the parties respective projected incomes on retirement.  And, as the
    trial judge observed, the wife herself was not qualified to offer evidence on
    income-tax related projections or tax rates.

[21]

Even
    if it was open to the wife to rely on the income tax rates included in the DSW
    Actuarial report, the wife herself applied a notional tax rate of 20.7% to the
    parties respective registered retirement savings plans in various of her financial
    statements.

[22]

It
    was open to the trial judge to determine, as he did, whether the whole of the
    evidence satisfied him of the appropriateness of the notional tax rates urged
    by the wife.  He concluded that it did not.  In the circumstances described above,
    the trial judge cannot be faulted for declining to apply divergent tax rates to
    the parties taxable assets.

(2)

Trial Judges Costs Award

[23]

The
    wife argues that in ordering each party to bear their own costs of the trial,
    the trial judge erred by failing to take into account the offers to settle
    exchanged by the parties prior to trial.  Her main contention is that the
    results she achieved at trial were better than the resolutions she proposed on
    key issues in her offer to settle.  As a result, she says, she was entitled to
    her costs of the trial.

[24]

The
    trial judge dealt with the issue of costs at para. 104 of his reasons:

Success in this case was divided and I am not inclined to
    consider making an award for costs either way.  The parties both sustained considerable
    financial loss with the post-separation collapse of First Leaside.  Adding now
    a further financial burden would not be fair to either party.  Consequently,
    the court uses its discretion and orders that each party shall bear their own
    costs.  [Citations omitted.]

[25]

The
    reasons do not expressly indicate whether the trial judge considered the
    parties offers to settle when assessing costs.  To the extent that the trial
    judge failed to take account of these offers to settle, we agree that he erred.

[26]

That
    said, on the results achieved at trial and in light of our disposition of the other
    issues on appeal, set out above, success at trial was divided.  The results
    achieved by the wife at trial on spousal and child support issues were more
    favourable to her than had been proposed by her in her offer to settle. 
    However, the wife was unsuccessful at trial in respect of the contested
    equalization payment issues, and the results achieved by the husband on these
    issues were materially better than had been proposed in the wifes offer to
    settle.  In addition, we have already concluded that the wifes challenge to
    the trial judges equalization payment ruling must be dismissed.

[27]

In
    these circumstances, the trial judge did not err in principle in his costs
    award.  Nor, in our view, is his costs award plainly wrong.  Accordingly, there
    is no basis for appellate interference with his discretionary costs award.

[28]

For
    these reasons, the appeal is dismissed.

B.      The Cross-Appeal

(1)     The Imputation of
    Income and Section 7 Expense Issues

[29]

The
    husband contends on his cross-appeal that the trial judge erred by imputing the
    following income to him: 2010 - $60,000; 2011 - $70,000; and 2012 - $80,000. 
    He does not take issue with the imputation of income of $50,000 for 2009.

[30]

At
    trial, the wife advanced several methodologies for imputing income to the
    husband.  The trial judge rejected them all, but still imputed income.  He
    reasoned, at para. 32:

Although I find the applicants methodology flawed, in that
    each approach, on its own, was insufficient to impute income to the respondent
     it is the cumulative effect of all of her approaches that provides a
    sufficient evidentiary base for me to consider the imputation of income, in a
    greater amount than the respondent admits to in his testimony and his financial
    statements.

[31]

We
    agree with the husband that this is not a proper basis for imputing income.  A
    series of rejected methodologies cannot, by rolling them together, become a
    valid methodology.  Four nos (by our count) do not make a yes.

[32]

However,
    there are other factors, discussed and relied on by the trial judge, that
    support his decision to impute income to the husband in the amounts he chose.

[33]

An
    important factor is the trial judges rejection of the husbands credibility on
    the income issue.  He said, at paras. 33 and 34 of his reasons:

The respondent admitted at trial, as he has throughout the
    proceedings, that he has filed false income tax returns with the Canada Revenue
    Agency.  He admitted that he collected employment insurance for about one year
    when he had income which he did not disclose, which would have disentitled him,
    and that he did not remit GST on a number of inspection payments made to him.



I find that the respondents actions are deceitful, fraudulent,
    and unlawful.  His unlawful conduct does negatively impinge on his credibility
    and if he is prepared to hide income from the authorities, he may well be
    hiding income from the court .

[34]

A
    second factor that supports the trial judges conclusion on this issue is the reliance
    he placed on the husbands lifestyle.  We cite but one example, at para. 49 of
    the trial judges reasons:

Since separation, he has taken some exotic vacations including
    a trip to Fiji and Australia.  He drives a BMW X5 which he paid for in cash and
    leases a Porsche Boxter for $575.00 per month.

[35]

In
    our view, these factors  credibility and lifestyle  taken together amply
    support the trial judges decision to impute income to the husband, and in the
    amounts he chose.

[36]

Based
    on the income imputed to the husband, we also see no error in the trial judges
    ruling that the husband shall pay 40% of the childrens s. 7 extraordinary
    expenses on a going forward basis.

(2)     The Spousal
    Support Issue

[37]

The
    husband argues that the trial judge erred by not awarding him spousal support.

[38]

The
    trial judge stated his conclusion on this issue in this fashion, at para. 50 of
    his reasons:

I find that the respondent has not suffered any economic
    disadvantage arising from the marriage or its breakdown.  If there is any disadvantage
    in this regard, it would be to the applicant who now only has her own income
    and a modest amount of child support to look after herself and two teenage
    daughters who live with her.  The respondent has not suffered any economic
    hardship arising from the breakdown of the marriage.  The respondent is
    self-sufficient and in my view is doing quite well in the home inspection
    business.

[39]

A
    trial judges decisions as to whether to award spousal support, and as to the
    quantum of spousal support, are discretionary decisions.  An appellate court
    should not interfere with these determinations absent an error in principle, a
    significant misapprehension of the evidence, or unless the order is clearly
    wrong: see
Hickey v. Hickey
, [1999] 2 S.C.R. 518, at para. 11.

[40]

In
    our view, the husband cannot bring the trial judges decision on spousal
    support within any of these categories.  There is no basis for appellate
    intervention.

[41]

Accordingly,
    the cross-appeal is dismissed.

C.      Costs of the Appeal and Cross-Appeal

[42]

Success
    on the appeal and cross-appeal is divided.  In these circumstances, we make no
    award of the costs of these proceedings.

Released:  MAR 17 2014                            J.C.
    MacPherson J.A.

EAC                                                          E.A.
    Cronk J.A.


E.E. Gillese J.A.





[1]
Before this court, the wife does not argue, as she did at trial, that she held
    the LP Investment in trust for the husband alone.


