



COURT OF APPEAL FOR ONTARIO

CITATION: Bortnikov v. Rakitova, 2016 ONCA 427

DATE: 20160601

DOCKET: C60474

Hoy A.C.J.O., Blair and Roberts JJ.A.



BETWEEN

Aleh Bortnikov

Applicant (Appellant/
Respondent by way of cross-appeal)

and

Marina Rakitova

Respondent (Respondent/
Appellant by way of cross-appeal)

Aleh Bortnikov, in person

Eric Shapiro, for the respondent/appellant by way of
    cross-appeal

Heard: April 18, 2016

On appeal from the judgment of Justice Michael A. Penny
    of the Superior Court of Justice, dated April 29, 2015, with reasons reported
    at 2015 ONSC 2546 and 2015 ONSC 3898, and from the costs order, dated June 17,
    2015, with reasons reported at 2015 ONSC 3898.

By the Court:

[1]

The parties were married on August 9, 2002 and separated on February 7,
    2011. The parties appeal and cross-appeal from the trial judgment of April 29,
    2015, in which the trial judge granted the parties a divorce and dealt with
    equalization of property, spousal support, and various other claims, including
    costs.

[2]

For the reasons that follow, we would allow the appeal with respect to
    one aspect of the equalization calculation, but would otherwise dismiss the
    appeal and cross-appeal.

Equalization

[3]

The principal asset in issue in these proceedings is a motel property
    called the Grand Motel, owned by 1291937 Ontario Inc. (the numbered company).
    The respondent is the sole shareholder of the numbered company. During the
    marriage, the parties resided in a two-storey house attached to the motel,
    which was their matrimonial home. On separation, the appellant left the
    matrimonial home and lived in the parties cottage property until it was sold
    and the proceeds divided between them.

[4]

The appellant raises again on appeal his claims for a share of the
    income and equity of the numbered company and his request that the motel
    property be sold. Although the appellant argues that he is pursuing those
    claims in the context of equalization, we agree with the trial judge that, as
    reflected in the January 26, 2015 Trial Management Conference Endorsement of
    Kiteley J., the appellant abandoned those claims before trial. He therefore
    cannot resurrect them on appeal.

[5]

The parties submit that the trial judge erred in his evaluation of the
    motel property, and the respondent challenges the trial judges evaluation of
    the matrimonial home.

[6]

We would not give effect to those grounds of appeal and cross-appeal.

[7]

The trial judge was entitled to rely on some, all or none of the
    experts report. His reasons demonstrate that he was alert to the deficiencies
    in the report and that he made appropriate adjustments in his calculation of
    the values of the motel and matrimonial home to account for those deficiencies.
    For example, he increased the value of the motel to take into account the
    comparable property that the expert had mistakenly excluded from his valuation.
    The trial judge also considered other relevant factors in his determination of
    value, such as the nature and size of the motel property and the motel market.
    It was within his discretion to increase the value of the property by
    $100,000.00. We see no error and would not interfere.

[8]

With respect to the matrimonial home, the trial judge acknowledged the
    difficulty in assessing the value of this property because of its uniqueness as
    part of the motel property. His calculation of the value of the matrimonial
    home was logical, fair and based on the portions of the experts report that he
    did accept. In particular, it was common ground that the house could not be
    sold other than in the context of a sale of all of the motel property. It
    therefore was appropriate to use a percentage of the value of the entire
    property as the basis for his evaluation. We see no error in his reasoning and
    would not interfere.

[9]

The appellant further submits that the trial judge erred in deducting
    notional real estate fees from the value of the motel because there was no
    evidence that the prospect of such a sale was reasonably likely.

[10]

The
    respondent included in her calculation of net family property debts and other
    liabilities, consisting of capital gains and real estate fees as disposition
    costs for the motel property. The motion judge did not deduct the notional
    capital gains, finding that he did not have enough information to be able to
    determine that those gains were reasonably likely on disposition. He concluded,
    however, that notional real estate fees of 5% of the date of separation value
    of the motel property should be deducted because It is clear that sooner or later
    the respondent will sell the Grand Motel and the prospect of a sale [was]
    sufficiently likely within the foreseeable future. While the trial judge noted
    that there was evidence that standard real estate fees are 5%, he did not
    indicate what evidence or inference led him to the conclusion concerning the
    foreseeability of the sale of the motel property.

[11]

As
    a general rule, in determining whether disposition costs should be deducted
    from an assets value, the analysis should take into account evidence of the
    probable timing of the assets disposition. It is appropriate to deduct
    disposition costs from net family property if there is satisfactory evidence
    of a likely disposition date and if it is clear that such costs will be
    inevitable when the owner disposes of the assets or is deemed to have disposed
    of them:
Sengmueller v. Sengmueller
(1994), 17 O.R. (3d) 208 (C.A.),
    at pp. 216-17. An allowance for disposition costs from net family property
    should not be made in the case where it is not clear when, if ever, a sale or
    transfer of property will be made:
McPherson v. McPherson
(1988), 63
    O.R. (2d) 641 (C.A.), at p. 647.  However, it is not necessary for the court to
    determine whether the disposition of the assets is inevitable; rather, the
    court should determine on the basis of the evidence whether it is more likely
    than not that the assets would be sold, at which point disposition costs would
    inevitably be incurred:
Buttar v. Buttar
, 2013 ONCA 517, at para. 20.

[12]

Specifically,
    when dealing with a business, as is the case here, this court gave the
    following guidance in
Sengmueller
, at p. 215:

In dealing with a business, one should fairly consider the
    nature of the business, the possible requirement that the business could only
    operate if the owner spouse continued to be involved, any shareholder agreement
    which required sale of his or her shareholding in specified circumstances, and
    myriad other possible considerations in the individual case.

[13]

In
    the present case, there was no clear and satisfactory evidence that the
    respondent was contemplating the possible sale of the motel property or her
    shares of the numbered company in the foreseeable future. Rather, the evidence
    and the respondents submissions appeared to the contrary.

[14]

At
    the time of the parties separation, there seems to have been some discussion
    between the respondent and her former husband about his repurchasing the
    business. However, in a subsequent email dated February 23, 2011, the
    respondent confirmed that she did not need to sell the motel in the near
    future, although she asked her former husband if he would agree to the
    transfer of the business shares to her children for the reason, among others,
    that in case of a good offer and sale of the motel this will cut the taxes.
    When cross-examined about this email, the respondent did not agree that she had
    received an offer to sell the motel property nor did she testify that she
    intended to sell the motel property in the foreseeable future. The respondent
    also testified that she had not transferred the shares to her children. In any
    event, the transfer of the shares to the respondents children would not
    require the sale of the motel property and therefore give rise to real estate
    commission fees.

[15]

Finally,
    in his opening and closing submissions, counsel for the respondent indicated
    her objection to the sale of the motel property, as requested by the appellant,
    and submitted that the respondent was capable of financing an equalization
    payment to the appellant without selling the motel property. As counsel stated
    in his opening submissions, the motel property represented not only the
    respondents livelihood but also her residence. At 55 years of age at the time
    of the hearing, and based on her counsels submissions, it was unlikely and
    there was no evidence that the respondent would retire in the foreseeable
    future.

[16]

As
    a result, without indicating the basis for his conclusion that the prospect of
    a sale [was] sufficiently likely within the foreseeable future and without an
    evidentiary foundation supporting it, the trial judge erred in allowing
    notional real estate fees of 5% to be deducted from the respondents net family
    property calculation. The notional fees calculated by the trial judge totalled
    $80,000.00. That figure is material and must be added back in to the
    equalization calculation, resulting in an increase of $40,000.00 to the
    equalization payment owing to the appellant.

Spousal support

[17]

The
    trial judge ordered the respondent to pay $35,000.00 as a tax neutral lump sum
    support payment to the appellant.

[18]

The
    appellant submits that the trial judge erred in calculating the spousal support
    on the basis of net rather than gross amounts and in reducing the support to
    make it tax neutral.

[19]

We
    disagree.

[20]

First,
    the trial judge correctly arrived at an average gross income figure for the
    purpose of calculating spousal support. It is clear that the trial judge
    considered gross as well as averaged figures in his estimate. In particular,
    the trial judge used the gross income figure of $36,000.00 from the
    respondents financial statement and the averaged amount of $40,000.00 that was
    given to the respondents children and then returned to the respondent. As a
    means of testing his estimate, the trial judge compared the gross average of
    $76,000.00 against a rough average of amounts representing deposits to the
    respondents bank account. There is no evidence that all of the deposits in the
    respondents bank account were net income amounts. Indeed, the respondents
    evidence was that some of the deposits did not represent net income amounts.
    Accordingly, not all of the deposits to her bank account were the respondents
    net income.

[21]

The
    trial judge was also entitled to make the lump sum figure tax neutral. He
    reasoned that consistency required him to exercise his discretion and make the
    amount tax neutral because he had treated the amount awarded as overdue spousal
    support bearing interest from the date of separation. This was fair and
    reasonable. There is no basis for interfering.

[22]

The
    respondent argues that the trial judge erred in awarding any spousal support to
    the appellant. While not pursued in oral argument, in her factum, the
    respondent submits that the trial judge erred by disallowing the respondents
    counsel to fully explore in cross-examination of the appellant whether the
    appellant was receiving support from his good friend, who was also his
    landlord. Further, the respondent contends that the trial judge erred in
    failing to apply
Novakovic v. Kapusniak
, [2005] O.T.C. 554 (S.C.),
    varied 2008 ONCA 381, to reject the appellants claim for spousal support.

[23]

We
    see no merit in those submissions.

[24]

The
    trial judge did not improperly curtail cross-examination of the appellant and
    correctly identified the relevant issue of whether the appellant was receiving
    financial support. The trial judge was entitled to accept the appellants
    evidence that he intended to use his equalization payment to satisfy his debt
    to his friend. In his reasons, the trial judge was alert to the fact that the
    appellant was receiving limited financial assistance from others.

[25]

We
    also see no error in the trial judges determination that the appellant was
    entitled to spousal support, which was based on the evidence before him that
    the appellant worked at the motel at the respondents request and to the
    respondents benefit. Those factors distinguish the present case from
Novakovic
,
    where the husband had an independent career and was paying his own way. The
    trial judges decision as to spousal support is entitled to deference and we
    would not interfere.

Other claims

[26]

The
    appellant argues that the trial judge erred in dismissing his claims for
    occupation rent from the respondent in relation to the matrimonial home, and
    for payment of a portion of the carrying costs of the cottage where he resided
    after the separation.

[27]

We
    agree with the trial judges determination that the appellant was not entitled
    to those amounts. As we have already noted, the appellant had abandoned any
    claims in relation to the business. He had no beneficial ownership in the motel
    or the matrimonial home. We also agree that the circumstances did not warrant
    requiring the respondent to pay the carrying costs of the appellants
    residence.

[28]

The
    appellant submits that the trial judge erred in rejecting his evidence and
    accepting the respondents evidence concerning the value of the respondents
    household goods because of her alleged bad faith conduct throughout these
    proceedings. We see no error in the trial judges rejection of the appellants
    estimate or the argument challenging the respondents credibility. The trial
    judge was entitled to accept the respondents figures.

Costs

[29]

Both
    parties accuse each other of bad faith conduct that supports their respective
    claims for costs. The parties claims are without merit. The trial judge did
    not err in concluding that neither partys conduct met the very high threshold
    for bad faith under r. 24(8) of the
Family Law Rules
, O. Reg. 114/99.
    While this was a high conflict case, there was no evidence of bad faith
    sufficient to invoke an entitlement by either party to full recovery costs.

[30]

The
    respondent cross-appeals the costs award to the appellant. The respondent
    submits that the trial judge pre-judged the appellants entitlement to costs
    and gave no reasons for his award, and that the appellant is not entitled to
    any costs. The respondent maintains that she should be awarded costs in the
    amount of $75,000.00. Although we would grant leave to appeal the costs award,
    we would not give effect to the respondents submissions.

[31]

The
    trial judges observation that the appellant was the substantially successful
    party and that he might seek costs was not a determination in relation to
    entitlement or quantum of costs prior to the parties submissions, but merely
    an observation that the appellant could seek costs.

[32]

While
    the trial judge gave no specific reasons for his determination that the appellant
    enjoyed greater success in the proceedings, it was obvious from the outcome of
    the trial that the appellant had been the more successful of the two.
    Specifically, the appellants equalization payment and spousal support were
    significant. As such, there was no reason for the trial judge to depart from
    the ordinary rule that the successful party is entitled to costs.

[33]

The
    respondent submits that the trial judge erred in failing to exclude from the
    costs award the appellants costs from a case conference before Klowak J.,
    because the endorsement was silent as to costs.

[34]

Islam
    v. Rahman
, 2007 ONCA 622, 228 O.A.C. 371, at para. 2, confirms that a
    trial judge should not make an order for costs in relation to any earlier step
    where no costs were ordered or where there was silence on the issue.

[35]

The
    trial judges order allowed two-thirds of the appellants out-of-pocket
    payments to his former lawyers, which included the costs in relation to the
    case conference before Klowak J. This was an error.

[36]

Nevertheless,
    we would not alter the quantum of the costs award. In our view, the amount of
    $31,894.00 awarded was reasonable, fair and proportionate in the circumstances
    of this case.

Disposition

[37]

Accordingly,
    the appeal is allowed with respect to the deduction of notional real estate
    fees. As a result, the equalization payment must be increased by the amount of
    $40,000.00. The appeal and cross-appeal are otherwise dismissed.

[38]

Success
    was divided on the appeal and cross-appeal. There shall be no order as to costs
    and the parties shall absorb their own costs of the appeal and cross-appeal.

Released: June 1, 2016

Alexandra
    Hoy A.C.J.O

R.A.
    Blair J.A.

L.B.
    Roberts J.A.


