



COURT OF APPEAL FOR ONTARIO

CITATION: Korman v. Korman, 2015 ONCA 578

DATE: 20150821

DOCKET: C59141

Feldman, Cronk and Huscroft JJ.A.

BETWEEN

Isaac Michael Korman

Applicant (Appellant)

and

Susan Korman

Respondent (Respondent)

Peter I. Waldmann and Matthew J. Armstrong, for the
    appellant

Evelyn K. Rayson and Diana L. Solomon, for the
    respondent

Heard: May 7, 2015

On appeal from the judgment of Justice Clifford S. Nelson
    of the Superior Court of Justice, Family Court Branch, dated June 23, 2014.

Cronk J.A.:

I.        Introduction

[1]

The appellant, Isaac Michael Korman (the Husband), and the respondent,
    Susan Korman (the Wife), married in 1988 and separated in 2009.  There are
    two children of the marriage: J., now approximately 22 years of age, and Je., soon
    to be 17 years of age.

[2]

In January 2010, the Husband applied for a divorce under the
Divorce
    Act
, R.S.C. 1985, c. 3 (2nd Supp.) and for various relief under the
Family
    Law Act
, R.S.O. 1990, c. F. 3 (the Act).  After an eight-day trial, the
    trial judge granted the parties a divorce.  He also ordered the matrimonial
    home to be sold, the Wife to pay an equalization payment in favour of the Husband,
    and the Husband to pay child and spousal support, as well as part of Je.s
    private secondary school education costs.

[3]

The Husband appeals from three aspects of the trial judgment: i) the trial
    judges finding that the Husband gifted his interest in the matrimonial home to
    the Wife when the parties purchased the property; ii) the trial judges
    imputation of income to the Husband based on money and dividends that one or
    both of his parents had previously gifted or allocated to him; and iii) the
    trial judges treatment of Je.s private secondary school fees as a s. 7
    extraordinary expense under the
Federal Child Support Guidelines
,
    SOR/97-175 (the 
Federal Guidelines
).  As these are the only issues
    on appeal, I will address only those facts pertinent to them.

II.       Background Facts

(1)

Matrimonial Home

[4]

At the date of separation, the parties resided with their children at a
    house on Marinucci Court in Richmond Hill, Ontario (the Matrimonial Home).  They
    had acquired this home in July 2002 for approximately $560,000. They paid the
    purchase price in full, using proceeds from the sale of their jointlyowned first
    matrimonial home in Aurora, Ontario, funds gifted to them by their parents 
    $150,000 from the Husbands parents and $50,000 from the Wifes parents  and accumulated
    joint savings.  The property was thus mortgage-free from the time of purchase.

[5]

Title to the Matrimonial Home was placed solely in the Wifes name.  The
    legal consequence of this arrangement is a principal issue on this appeal.

[6]

When the parties purchased the Matrimonial Home in 2002, the Husband was
    working as an investment advisor.  In August of that year, he received a letter
    of caution from the Investment Dealers Association of Canada in respect of a
    client complaint.  Some seven years earlier, the Husband had made an error in
    authorizing a client transaction, prompting him to leave the firm at which he
    was then working to obtain new employment.

[7]

At trial, the Wife maintained that the parties had placed title to the
    Matrimonial Home in her name alone to protect it from potential claims by
    creditors arising out of the Husbands employment.  She argued that, since she
    was the sole registered owner of the Matrimonial Home, she alone was entitled
    to any post-separation increase in its value.

[8]

The Husband resisted this claim.  He maintained that he never intended
    to gift his interest in the Matrimonial Home to the Wife; that the Wife
    insisted that title to the Matrimonial Home be put in her name alone to protect
    it from potential creditors; and that he loved and trusted the Wife and wanted
    to make her happy and therefore simply acquiesced to her demand, without
    considering any potential legal consequence of so doing, even though he was not
    concerned about creditors.  Based on principles of constructive and resulting trust,
    as well as unjust enrichment, the Husband argued that he was entitled not only
    to an equal share in the value of the Matrimonial Home on the date of
    separation (V-Day) but also to an equal share in any post-separation increase
    in the propertys value.

[9]

The trial judge found that the Matrimonial Home had a value of $725,000
    on V-Day and $940,000 by April 2013.  By the time of trial, it was likely
    worth more: at para. 49.

[10]

The
    trial judge concluded that, while the Husband was entitled to share in the
    value of the Matrimonial Home at V-Day by reason of the equalization provisions
    of the Act, the Wife through ownership  benefits in any increase in value of
    the [Matrimonial Home] as and from [V-Day]: at para. 67.  He reasoned as
    follows, at paras. 65-67:

When the [Husband] transferred the entire house to the [Wife]
    he did so because he loved her.  There were no strings attached to this gift. 
    I also find that the house was put into the [Wifes] name to protect it from
    potential creditors so that the [Husband] could, at some time in the future, if
    necessary, protect family assets from third party creditors.

The equalization provisions of the [Act] give the [Husband] the
    protection afforded by our laws in the sense that these provisions will give
    him his lawful share in the rise in value of the property up to and including
    the date of separation.  While he may have made further contributions to the
    running costs of the property after the date of separation, those
    contributions, which were not categorized, nor proved, would fall into the
    category of support payments belonging to the [Wife].

The concept of constructive trust survives the equalization
    process set out in the [Act], it seems to me that it would be the rare case
    where it should be applied to prevent a clear injustice not cured by the usual
    equalization scheme.

(2)

Income Imputation to the Husband

[11]

Neither
    Je.s entitlement to ongoing child support nor the Wifes entitlement to
    spousal support was seriously contested at trial.  The parties were divided,
    however, on the questions of retroactive child support for both children of the
    marriage and the quantum of retroactive and ongoing spousal support.

[12]

To
    resolve the contested aspects of child and spousal support, the trial judge had
    to determine the parties respective incomes.  He made the following pertinent
    findings:

1)

[w]hile the [Wife] does
    have some employment skills and worked from time-to-time during the marriage, she
    mainly stayed home to raise the children while the [Husband] was the family
    breadwinner: at para. 90;

2)

during the marriage,
    the Husbands parents assisted the parties financially in many ways. This
    assistance included: i) gifts to the Husband from his father in the aggregate
    amount of $590,000 to start two businesses, both of which ultimately failed: at
    paras. 95-97; ii) a gift to the Husband from his mother, Ruth Korman, after the
    date of separation, in the sum of $14,000 to invest in another corporate
    venture: at para. 99; iii) gifts from Ruth Korman to pay for or assist with camp
    and private school expenses for the children of the marriage: at para. 100; and
    iv) funds from Ruth Korman to assist the Husband with his costs of the matrimonial
    litigation: at para. 99;

3)

the financial
    assistance from the Husbands parents also took the form of dividend income
    allocated to the Husband and his three sisters by Gleedah Investments
    (Gleedah), a corporation controlled by Ruth Korman.  This dividend distribution
    scheme was effected to reduce Ruth Kormans annual income tax liability. 
    Neither the Husband nor his siblings actually received the allocated dividends:
    at paras. 112-18;

4)

over the years, the Husband
    and his family benefitted greatly from the funds he received from his
    parents.  Historically, the parties incurred significant family expenses based
    on the Husbands anticipated receipt of funds from his parents: at para. 122;

5)

prior to 2008, the Husband
    earned significant employment income.  However, commencing in 2008, his income
    suffered a significant decline due to market reversals and the general downturn
    in the economy.  His reported income from all sources (including allocated
    dividend income) was $145,469.10 in 2010, $138,447.30 in 2011 and $120,659.80
    in 2012: at paras. 106-07;

6)

by consent orders
    dated August 30, 2010 and September 12, 2012, the Husband agreed to pay
    temporary child support for both children in the amount of $1,644 per month and
    spousal support in the amount of $2,120 per month based on a disputed annual
    income of $120,000: at paras. 93, 129 and 193;

7)

over time, the Husband
    fell seriously in arrears of the consent support orders: at para. 93;

8)

based on the
    familys history, gifts to the Husband by way of dividend income will likely
    continue to flow to [him] for the rest of his life and funds will continue to
    be given to the [Husband] by his mother, whether by gift or through some other
    tax-friendly plan: at paras. 123 and 126; and

9)

the Husband has
    always received money from his parents and will likely continue to receive them
    [
sic
] from his mother: at para. 126.

[13]

Based
    on these findings, the trial judge imputed annual income to the Husband in the
    amount of $120,000: at para. 129.  As I will discuss later in these reasons,
    the Husband attacks this income imputation on several grounds.

[14]

The
    trial judge also imputed annual income to the Wife in the amount of $20,000
    until January 1, 2015 and $25,000 thereafter: at para. 146.  The Husband does
    not challenge this income imputation to the Wife.

(3)

Private Secondary School Fees

[15]

Je.
    was almost 16 years old at the time of the trial judgment and continues to be
    dependent on the parties for her support.  She has attended private parochial
    schools for her entire life.  By the date of judgment, about two years remained
    for the completion of her secondary education.

[16]

By
    contrast, at the time of judgment, J. was 21 years of age and independent.  There
    was and is no issue regarding ongoing child support for J.

[17]

On
    the trial judges findings, one of the pressure points in the parties marriage
    was the cost of the childrens private religious schooling.  With the advent of
    the global economic recession in 2008, the parties differences regarding the
    costs of private school tuition and related expenses intensified.  The Husband
    urged public school placements for the children.  The Wife refused.

[18]

At
    trial, the Husband maintained that he was unable to pay for private schooling
    for Je.; that the childrens grandmother (Ruth Korman) had underwritten the
    cost of the childrens private education in the past in the exercise of her
    discretion; and that her future payment of such expenses was uncertain.  The Husband
    argued that, in these circumstances, the costs of Je.s private secondary school
    education were not a proper s. 7 extraordinary expense under the
Federal Guidelines
and that the parties could not afford to continue to pay these costs.

[19]

The
    trial judge disagreed.  He held that, given the annual incomes he had imputed
    to both parties, the parties commitment to Je. regarding her schooling and her
    life-long attendance at private schools, the costs of Je.s continued attendance
    at private school for the completion of her high school education were a proper
    s. 7 expense: at paras. 152-53.  He directed that the Husband pay 66.6% of Je.s
    remaining private secondary school costs, including incidental expenses
    directly related to her education: at para. 205.

III.      Issues

[20]

There
    are three issues:

1)

Did the trial judge
    err in finding that the Husband gifted his interest in the Matrimonial Home to
    the Wife in 2002, when the parties acquired the property?

2)

Did the trial judge
    err in imputing income to the Husband based on gifts that one or both of his
    parents had given to him and on dividend income allocated to him?

3)

Did the trial judge
    err in treating Je.s private secondary school fees as a s. 7 extraordinary expense
    under the
Federal Guidelines
?

IV.     Analysis

(1)

Matrimonial Home

[21]

The
    Wife accepts that the Husband is entitled to an equal share in the value of the
    Matrimonial Home on V-Day.  The dispute between the parties concerns the narrow
    question whether the Husband is also entitled to an equal share in any
    post-separation increase in the value of the Matrimonial Home, the amount of
    which has yet to be determined.

[22]

The
    trial judge rejected the Husbands claim to an equal share in any
    post-separation increase in the value of the Matrimonial Home on three bases:

1)

he
    viewed the Husbands claim as inconsistent with the objective of placing the
    Matrimonial Home beyond the reach of creditors.  He found that, when the
    property was acquired in 2002, the Husband unconditionally gifted his interest
    in it to the Wife to protect it from claims by potential creditors and because
    the Husbands love for the Wife caused him to accede to her demand that title
    to the property be placed solely in her name for this protective purpose: at
    para. 65;

2)

while
    he recognized that the concept of constructive trust survives the equalization
    process set out in the [Act], he concluded that it would be the rare case
    where it should be applied to prevent a clear injustice not cured by the usual
    equalization scheme: at para. 67; and

3)

he
    held that any post-separation contributions by the Husband to the upkeep and
    maintenance of the Matrimonial Home were not proven at trial and, in any event,
    would fall into the category of support payments: at para. 66.

[23]

In
    my opinion, the trial judges ruling on this issue is unsustainable for the
    following reasons.

(a)

Beneficial Ownership of the Matrimonial Home

[24]

The critical issue at trial concerning the Matrimonial Home was whether
    the Husband intended to gift his interest in the property to the Wife when the
    property was acquired in 2002.

[25]

For
    married spouses, the Act provides a comprehensive scheme for resolving
    financial issues following marriage breakdown.  Section 10(1) of the Act
    authorizes a court to determine questions of title between spouses.  This
    includes considering whether legal title actually reflects beneficial
    ownership.  As indicated by this court in
Martin v. Sansome
, 2014 ONCA
    14, 118 O.R. (3d) 522, at para. 47, citing
Rawluk v. Rawluk
, [1990] 1
    S.C.R. 70, [b]efore property can be equalized under the [Act], a court must
    first determine the net family property of each spouse.  This exercise
    requires first that all questions of title be settled.  In other words, property
    entitlements must be determined before they can be equalized.

[26]

Section
    14 of the Act affirms the presumption of a resulting trust in determining
    questions of ownership between spouses in the context of gratuitous property
    transfers.  Where the presumption is invoked, the party resisting the
    imposition of a resulting trust is required to disprove the presumption that
    his or her spouse is the beneficial owner of an interest in the disputed
    property.

[27]

In
Kerr v. Baranow
, 2011 SCC 10, [2011] 1 S.C.R. 269, at paras. 16-19,
    the Supreme Court confirmed that a traditional resulting trust may arise in the
    domestic context where, as here, there has been financial contribution to the
    initial acquisition of a property and a subsequent gratuitous transfer of title
    to the property.  In these circumstances, the actual intention of the
    transferor is the governing consideration.  See also
Pecore v. Pecore
,
    2007 SCC 17, [2007] 1 S.C.R. 795, at paras. 43-44;
Schwartz v. Schwartz
,
    2012 ONCA 239, 290 O.A.C. 30, at paras. 41-42.   Further, the intention of the
    transferor to make a voluntary and gratuitous transfer is an essential
    ingredient of a legally valid gift: see
McNamee v. McNamee
, 2011 ONCA
    533, 106 O.R. (3d) 401, at para. 24.

[28]

At
    the appeal hearing, although the Husband relied on the s. 14 statutory
    presumption of resulting trust, he focused his claim regarding the Matrimonial
    Home mainly on principles of constructive trust and unjust enrichment.  It
    appears that he proceeded at trial in a similar fashion.  As a result, the
    trial judge made little reference to the s. 14 presumption.

[29]

The
    focus of the Husbands argument on this issue was misconceived.  As I have
    said, under the Act, questions of title must be settled before property can be
    equalized.  By reason of s. 10 of the Act, trust claims  including claims
    based on constructive or resulting trust  may be advanced prior to
    equalization.  And, crucially, s. 14 legislates a presumption of a proprietary
    resulting trust.  Where the presumption applies, it yields a finding of
    beneficial ownership in the context of a gratuitous property transfer.  The Act
    contains no analogous presumption of constructive trust.

[30]

In
    my view, the Husbands claim regarding the Matrimonial Home turns on whether
    the Wife met her burden at trial to disprove the presumption that the Husband
    was the beneficial owner of a one-half interest in the Matrimonial Home.  Her
    argument, in effect, was that the presumption of a resulting trust was rebutted
    by evidence of a voluntary and irrevocable, gratuitous gift by the Husband of
    his interest in the Matrimonial Home to the Wife at the time of its
    acquisition.

[31]

And
    it is here, in my opinion, that the Wifes failure to meet her burden is
    evident.  Neither the Wifes own trial evidence nor that of the Husband
    supported a finding that the presumption of a resulting trust in respect of the
    Matrimonial Home had been displaced.

[32]

Turning
    first to her evidence at trial, the Wife never said that the Husband gifted his
    interest in the Matrimonial Home to her.  To the contrary, she testified that
    while title to the Matrimonial Home was put in her name to protect it from
    potential claims by creditors, the Husband nonetheless had a full interest in
    the Matrimonial Home.

[33]

The
    trial judge viewed the parties evidence on this issue as quite muddled and a
    little surprising: at para. 56.  Nonetheless, he appears to have captured the
    essence of the Wifes testimony at paras. 60-61 of his reasons:

The [Wife] is adamant, both in parts of her testimony and in
    her submissions, that the house was placed in her name to protect it in the
    future.  She states that it was the [Husbands] idea to deal with title this
    way as he was the one in the family with a financial background.

A difficulty with the [Wifes] position, however, is that on
    cross-examination, she clearly stated that it was her view that no matter how
    the family held assets, their value should be shared equally.  She made no
    exception for the matrimonial home.  Her point was that, as far as she was
    concerned, the marriage was one of financial equality.  Had there been
    creditors, the equity in the matrimonial home would have been insulated against
    a potential lawsuit for the benefit of the family.

[34]

The
    trial judge rationalized the Wifes evidence on this issue on the basis that
    she had claimed an interest in the Gleedah family business.  He stated, at
    para. 62:

Given the totality of the evidence with respect to the family
    business,
while not specifically expressed, I can reasonably infer that
    the [Wife] meant that she would willingly divide all assets equally if those
    assets included the value of the Gleedah shares
.  In other words, if all
    assets she thought were owned by the [Husband] could be shared equally, then so
    could the house.  [Emphasis added.]

[35]

With
    respect, this inferential gloss on the Wifes evidence conflicts with the core
    of her trial testimony regarding the Matrimonial Home.  The Wife did not in any
    way qualify her admission at trial that the Husband had a full interest in the
    Matrimonial Home.  She did not assert that his equal interest in the house was
    conditional on her having an equal interest in his shares in Gleedah.  And, as
    I have indicated, she did not say that the Husband gifted his interest in the
    Matrimonial Home to her.  Instead, she testified on cross-examination that the Husband
    had a full interest in the Matrimonial Home and, in effect, that the assets
    held during the marriage were to be shared equally.

[36]

Nor
    did the Husband suggest that he intended to gift his interest in the
    Matrimonial Home to the Wife because he loved her.  When cross-examined by the Wife
     who was self-represented at trial  the Husband testified as follows:

We had our [first] home in joint name[s] in Aurora.  I loved
    you.  I trusted you.  You said its because of creditors.  I said well, look,
    I have  Im not worried about creditors.  Ive never been sued in my life. 
    So, I said whatever makes you happy.  And I had, at that point, as I said 
    its not a key thing but I had liability insurance, you know, from my business
    and I didnt see the  I didnt know of any future ramification and so I  I
    acceded to your request.

[37]

Thus,
    I do not think it can fairly be said that either the Wifes or the Husbands
    trial testimony supports the trial judges key finding that the Husband unconditionally
    gifted his interest in the Matrimonial Home to the Wife in 2002 when the
    parties purchased the property.  The trial judges impugned finding to the
    contrary ignores the presumption of resulting trust that operates in favour of
    the Husband.  Moreover, in my opinion, even absent the presumption, the
    evidence at trial does not ground a finding of a clear intention to gift.

[38]

Furthermore,
    any motivation to shield the property from the Husbands potential creditors
    does not in itself rebut the presumption of a resulting trust.  In
Nussbaum
    v. Nussbaum
(2004), 9 R.F.L. (6th) 455 (Ont. S.C.), Karakatsanis J., then
    of the Superior Court of Justice, noted that, despite a line of cases  where
    the court has found the specific intention to evade creditors means an implied
    intention to deprive oneself of beneficial ownership, and [w]hile evidence
    that someone intended to fully evade creditors can be evidence that they
    intended to gift their entire interest in the property, the intention of the
    parties is a question of fact to be determined from all the evidence: at paras.
    19-27 and 32.  See also
Schwartz
, at para. 43.

[39]

The
    trial judges finding that the Husband unconditionally gifted his interest in
    the Matrimonial Home to the Wife denied the Husband any proprietary interest in
    the Matrimonial Home.  For the reasons given, I conclude that, in light of the unrebutted
    presumption of a resulting trust, the trial judge committed a palpable and
    overriding error in finding that the Husband did not retain a beneficial
    ownership interest in the Matrimonial Home.

(b)

Effect of Beneficial Ownership of the Matrimonial Home

[40]

The determination that the Husband is a beneficial owner of a one-half
    interest in the Matrimonial Home is dispositive of his entitlement to share in
    any post-separation increase in the value of the property: he is placed in the
    same position as a joint owner on title, thereby becoming entitled to a
    one-half interest in the value of the Matrimonial Home
whenever
that
    value crystalizes.  Consequently, when the property is sold, the Husband will
    be entitled to one-half of the net proceeds of sale, reduced by any unpaid share
    in the expenses of upkeep.  The value of the Matrimonial Home at V-Day is thus
    irrelevant since, for the purpose of equalization, a one-half interest in the
    property is placed on each side of the parties property ledgers, requiring no
    further equalizing exercise.

[41]

The
    Wifes argument to the contrary relies on this courts recent decision in
Martin
. 
    The Wife says that
Martin
confines married spouses property claims to
    the equalization provisions contained in the Act, except in rare cases.  In her
    submission, a case in which a matrimonial home has increased in value since the
    date of separation is insufficiently rare to fall within that exception.

[42]

I
    do not read
Martin
in the manner urged by the Wife.
Martin
is
    an unjust enrichment case.  Unlike this case, it concerns the sufficiency of a
    monetary remedy once unjust enrichment in respect of a joint family venture has
    been found.
Martin
does not involve the presumption of a resulting
    trust or an asserted gift of property between spouses.

[43]

Perhaps
    more importantly,
Martin
illustrates, in the context of married
    spouses, that where either a monetary or a proprietary remedy in respect of
    property is claimed and a monetary award is sufficient to address unjust
    enrichment, the court should look to the Acts equalization provisions to
    determine the appropriate amount of the monetary award.  The
Martin
court put it this way, at para. 66: [i]f unjust enrichment as the result of a
    marriage has been found, and it has been determined that monetary damages can suffice,
    the aggrieved partys entitlement under the equalization provisions of the
    [Act] should first be calculated.

[44]

That
    is not this case.  Here, the application of the unrebutted statutory
    presumption of a resulting trust establishes an entitlement to property
    ownership, as opposed to a monetary award.  And the establishment of an
    entitlement to ownership, as opposed to a monetary award, precedes the
    calculation of net family property and the application of the equalization
    provisions of the Act.

[45]

Martin
,
    therefore, does not assist the Wife.  On this evidentiary record, the Wife did
    not rebut the statutory presumption of a resulting trust by establishing an
    unequivocal intention by the Husband to gift his interest in the Matrimonial
    Home to her.  Consequently, the Husband is entitled to full recognition of his
    50% beneficial interest in the Matrimonial Home.  It follows that he is
    entitled to 50% of the net proceeds of the sale of the Matrimonial Home, less
    his share of the maintenance costs of the Matrimonial Home until the date of
    sale.  I will return to the details of this remedy later in these reasons.

(2)      Income Imputation to
    the Husband

[46]

Under
    s. 19(1) of the
Federal Guidelines
, the court is empowered to impute such
    amount of income to a spouse as it considers appropriate in the circumstances. 
    The section lists a number of circumstances in which such imputation may be
    appropriate.  None of these specifically includes monetary gifts or other direct
    parental financial assistance received by a payor spouse.

[47]

In
Bak v. Dobell
, 2007 ONCA 304, 86 O.R. (3d) 196, this court considered s.
    19(1) of the
Ontario Child Support Guidelines
, O. Reg. 391/97 (the 
Ontario
    Guidelines
)  a provision that is virtually identical to s. 19(1) of the
Federal
    Guidelines
.
Bak
is instructive in several respects.

[48]

First,
Bak
holds that the circumstances listed in s. 19(1) of the
Ontario
    Guidelines
 and, by analogy, those listed in s. 19(1) of the
Federal
    Guidelines
 are simply examples of situations in which the imputation of
    income to a payor spouse may be appropriate.  There are also other
    circumstances in which the court may conclude that income can, and should, be
    imputed:
Bak
, at para. 35;
Riel v. Holland
(2003), 67 O.R.
    (3d) 417, 42 R.F.L. (5th) 120 (C.A.), at para. 36.  The
Bak
court
    observed, at para. 34:

The list of circumstances in s. 19(1) is not exhaustive: the
    legislature only provides that the list include items (a)  (i).  Further,
    there is nothing in the provision that suggests other appropriate circumstances
    must be analogous to those specifically enumerated, although similarity of
    circumstance to one listed in s. 19(1) would support the imputation of income,
    simply because such a circumstance would be consistent with legislative
    intention. The absence of analogy to a listed circumstance is simply a factor
    to be considered in interpreting the provision.

[49]

Second,
Bak
recognizes that the
    imputation of income to a payor spouse is a factspecific exercise that
    depends on the circumstances of the family at issue: at para. 73.  For this
    reason, the court observed, the legislature provided the courts with a
    residual discretion [under the
Ontario Guidelines
] to be exercised by
    a trial judge based on his or her factual findings: at para. 73.

[50]

Third,
Bak
confirms that income for support purposes is presumptively the
    payors income as it appears on line 150 of his or her income tax return: at
    para. 30.  Consequently, under the
Ontario Guidelines
, income is
    presumptively restricted to that which is subject to taxation.  Since gifts are
    not subject to taxation, they are not included in a payors presumptive income:
    at para. 31.

[51]

However,
    whether income should be imputed to a payor spouse does not depend solely on
    the determination of that spouses presumptive income.  The courts retain
    discretion to impute income to a payor spouse in excess of that spouses
    presumptive income where the imputed income is supported by the evidence and is
    consistent with the objective of establishing fair support based on the means
    of the parents in an objective manner that reduces conflict, ensures
    consistency and encourages resolution:
Bak
, at para. 36;
Drygala
    v. Pauli
(2002), 61 O.R. (3d) 711, 29 R.F.L. (5th) 293 (C.A.), at para. 44.

[52]

In
    this case, the Husband does not contest the trial judges authority under s.
    19(1) of the
Federal Guidelines
to impute income to him for the
    purpose of determining his ongoing child and spousal support obligations.  He
    argues, however, that the trial judge erred in imputing annual income in the
    amount of $120,000.

[53]

The
    trial judge based his calculation in part on his finding that the Husband would
    continue to receive funds from his mother, whether by gift or through some
    other tax-friendly plan: at para. 126.  This was an error, the Husband submits,
    since it impermissibly shifts the burden of sustaining the Wifes and Je.s
    lifestyle onto his mother  Ruth Korman  who has no legal obligation to
    support either her granddaughter or the Wife.  The proper approach, the Husband
    says, would have been to impute income to him in the sum of $96,834
per
    annum
 the amount of his average annual employment income from 2010 to
    2012.

[54]

I
    would reject this argument for several reasons.

[55]

In
    his calculation of income to be imputed to the Husband, the trial judge
    considered the Husbands income from three sources: i) his employment income,
    as disclosed in his annual income tax returns; ii) monetary gifts received over
    the years from one or both of his parents; and iii) annual dividend income from
    Gleedah, as reported by the Husband in his income tax returns.

[56]

Earlier
    in these reasons, I set out the amount of the Husbands annual income for the
    years 2010-12, inclusive of dividend income from Gleedah, as reported for tax
    purposes.  Based on those figures, the Husbands average annual income for the
    three years prior to trial was $134,858.73, well above the $120,000 per year
    that the trial judge imputed to him.  This average annual income figure
    establishes the Husbands presumptive income for the purpose of the
Federal
    Guidelines
.

[57]

However,
    the Husbands presumptive income includes dividends allocated to him by Gleedah. 
    The Husband contends that, since he never actually received this dividend
    income, the trial judge should have excluded it from his income imputation
    analysis.  On this evidentiary record, I agree.

[58]

The
    evidence at trial established that the Husband is a non-voting shareholder of
    Gleedah.  His mother, through her voting shares, controls the corporation and,
    hence, its dividend declaration policy and allocations.

[59]

Before
    this court, it is undisputed that the historical dividends that Gleedah
    allocated to the Husband and his siblings did not reflect funds they actually
    received.  Nor did they correlate to the amount of monetary gifts they received
    in any given year from their mother.  Rather, Ruth Korman disbursed funds from
    Gleedah in the exercise of her sole discretion.  Gleedah declared dividends and
    allocated them to the Husband and his siblings only on paper for the purpose
    of reducing Ruth Kormans annual taxable income.  While each child declared the
    allocated dividends on his or her own tax return, Ruth Korman used the funds at
    issue for her own living expenses.  She also withdrew money from the
    corporation to pay each childs resulting tax liability.  Thus, on this record,
    the Husbands dividend income was more notional than real.

[60]

In
    these circumstances, I do not think that the trial judges imputation of income
    to the Husband based on assumed dividend income from Gleedah can be said to have
    been grounded in the evidence.  It follows, in my view, that the trial judge
    made a palpable and overriding error in including the Husbands declared
    dividend income from Gleedah in his calculation of the quantum of annual income
    to be imputed to the Husband.

[61]

That,
    however, does not end the matter.  His reported dividend income aside, the Husbands
    gross income from employment in the three years prior to trial was $140,675.33
    (2010), $204,336.77 (2011) and $175,067.00 (2012).  His average annual gross
    income from the same source  during the same three-year period  was therefore
    $173,359.70.  His average annual net income was $96,834.73.

[62]

The
    generous monetary gifts made to the Husband by one or both of his parents are
    also a proper and necessary consideration.  The trial judge found, at para.
    119, that [t]hrough the marriage, very generous gifts were given to the
    parties and, at para. 126, that funds will continue to be given to the [Husband]
    by his mother, whether by gift or through some other tax-friendly plan.  While
    some of these gifts were intended to enhance the Husbands employment prospects
    and his career, others were not.  And, contrary to the Husbands submission, the
    thrust of the trial judges findings is that these gifts were neither irregular
    nor infrequent.

[63]

In
    this context, the trial judge emphasized that: the [Husband] has always
    received money from his parents and will likely continue to receive [monetary
    gifts] from his mother: at para. 126.  He went on to hold, at para. 129, that,
    [w]hile it is impossible to know exactly how much the [Husband] will benefit
    from gifts or dividends, the amount of $120,000.00 strikes a reasonable balance
    between earnings and other cash flow the [Husband] is likely to receive.

[64]

The
    evidentiary record amply supports these findings.  There was evidence before
    the trial judge establishing a settled pattern of monetary gifts to the Husband
    by one or both of his parents, over many years, to assist him in maintaining
    his familys lifestyle, to finance specific family expenditures  such as private
    school tuition or camp expenses for the children  or to underwrite the costs
    of the Husbands various business ventures.

[65]

Moreover,
    these gifts were substantial.  Between 1990 and 2009 (the year of separation),
    one or both of his parents gifted at least $986,000 to the Husband.  These
    funds covered a significant part of the purchase price of the parties Matrimonial
    Home, the costs of the Husbands various business ventures and investments, and
    the childrens private school and camp fees.  In the five years following
    separation, 2009 to 2013, the Husband received additional funds from his mother
    in the approximate amount of $73,500, plus the sum of $100,000 for his costs of
    the matrimonial litigation.  These funds were used to defray personal and
    family-related expenses.

[66]

I
    note that, contrary to the Husbands submission, imputing income on the basis
    of these substantial and consistent gifts does not impose any obligation on the
    Husbands mother to continue such gifts in the future.  It simply reflects the
    trial judges factual determinations about the Husbands actual past revenues
    and his likely financial future.  If the situation changes, it would be open to
    the Husband to request an adjustment accordingly, in the normal manner.

[67]

I
    am therefore not persuaded that the trial judge erred in imputing global annual
    income to the Husband in the sum of $120,000.  This is not a case like
Bak
,
    where a parent provided financial assistance to support a disabled adult child
    who would otherwise have been unable to support himself.  The Husband is able
    to support himself and has also received regular and substantial gifts from his
    parents, for many years.  These gifts helped the Husband establish a lifestyle
    well in excess of a basic standard of living for himself and his family during
    the marriage.  They have also assisted the Husband with his lifestyle and his
    liabilities since separation.  At trial, the Husband did not call any evidence
    to suggest that the intended duration of these gifts was limited or that they
    would cease as a result of the parties separation.  Indeed, as I have
    indicated, the gifts continued post-separation, in material amounts.

[68]

Finally,
    the annual income imputed to the Husband ($120,000) is the same amount to which
    he stipulated in two consent support orders, dated August 30, 2010 and
    September 12, 2012.  Although the Husband did not admit the amount of income
    imputed to him in those orders, he also did not move to vary or appeal the
    child and spousal support orders containing this imputation of income.

[69]

For
    all these reasons, I see no basis on which to disturb the trial judges discretionary
    imputation of income to the Husband.

(3)     Section
    7 Extraordinary Expense: Je.s Private Secondary School Fees

[70]

Under
    s. 7(1)(d) of the
Federal Guidelines
, a childs extraordinary
    expenses for primary or secondary school education or for any other educational
    programs that meet the childs particular needs qualify as special or
    extraordinary expenses for which provision may be made by a court in a child
    support order.  The designation of a particular expense as a s. 7 expense must
    be based on: i) the necessity of the expense in relation to the childs best
    interests; and ii) the reasonableness of the expense in relation to the means
    of the spouses and those of the child and to the familys spending pattern
    prior to the separation.

[71]

The
    only s. 7 expense at issue in this case concerns the tuition fees and associated
    expenses for Je.s private schooling for approximately two years after trial,
    to permit her to complete her secondary education in a parochial private school. 
    As I have said, Je. has attended private parochial schools her entire life.  J.
    completed both his primary and secondary education at such schools.

[72]

The
    trial judge appreciated that Ruth Korman  Je.s grandmother  has been very
    generous in assisting with [private school] fee payments: at para. 153.  He
    also recognized that the continuation of this assistance after trial was
    uncertain.

[73]

However,
    given the annual income imputed to the Husband and the fact that, by the time
    of trial, J. no longer required any contributions from the Husband to his expenses,
    the trial judge concluded that Je.s secondary school fees qualified as a s. 7
    expense under the
Federal Guidelines
and that both parents would have
    to make Je.s secondary education a priority: at para. 153.

[74]

I
    see no reversible error in this ruling.  The trial judge expressly applied the
    two-part test of necessity and reasonableness and addressed Je.s needs and
    best interests, the parties historical approach to the childrens schooling,
    and the Husbands financial ability to meet his share of this expense.  Having
    properly considered these factors, the trial judge concluded that Je.s
    remaining private high school fees qualified as a s. 7 expense and that she,
    like her brother, should be allowed to complete high school in a private
    school, consistent with her school placements throughout her life.  This was
    the trial judges call to make.

[75]

I
    would reject the Husbands attack on this time-limited obligation.

V.      Remedy
    and Disposition

[76]

The
    trial judge ordered that the Wife pay the Husband a net equalization payment in
    the sum of $245,597.70; that the Matrimonial Home be listed for sale forthwith;
    and that the equalization payment be paid to the Husband from the net proceeds
    of the sale.

[77]

Several
    comments are appropriate.

[78]

First,
    the trial judges calculation of the net equalization payment was premised in
    part on his finding that, by reason of her sole ownership of the Matrimonial
    Home, the Wife alone is entitled to benefit from any post-separation increase
    in the value of the property.  I have concluded that this finding is
    unsustainable and that the Husband is entitled to an equal share in any post-separation
    appreciation in the value of the Matrimonial Home.  However, on the trial
    judges findings, the Husband failed to demonstrate at trial that he had made
    any contributions to the upkeep of the Matrimonial Home since the date of
    separation.  The Husband, therefore, is liable for his 50% share of those
    expenses.

[79]

Second,
    the trial judges calculation of the equalization payment provided for the
    deduction, from the amount otherwise payable, of the Husbands child and
    spousal support arrears as at the date of the trial judgment ($57,498).  Those arrears
    have continued to mount.  This court was informed that, based on records
    maintained by the Family Responsibility Office, the Husbands child and spousal
    support arrears had increased by $25,296 as of April 1, 2015, yielding total
    arrears in the sum of $82,794 as of that date.

[80]

Consistent
    with the trial judgment, the increase in arrears should be deducted from the
    equalization payment.  Accordingly, I would direct that the net equalization
    payment be further reduced by the sum of $25,296.  I would also continue the
    trial judges order that no interest should be payable on the equalization
    payment or on the Husbands outstanding support arrears.

[81]

Finally,
    for various reasons and notwithstanding the terms of the trial judgment, the
    Matrimonial Home has not yet been sold.  The Wife seeks an order that her
    obligation to make the net equalization payment be stayed and that that payment
    serve as security for the Husbands ongoing support obligations until those
    obligations terminate.

[82]

I
    would not accede to this request.  The trial judge ordered the Husband to pay
    monthly child support for Je. and monthly spousal support for the Wife until
    further court order: at paras. 204 and 207.  Thus, absent further court order,
    the Husbands support obligations are indefinite.  To accept the Wifes stay
    request would be to permit her to continue to reside in the Matrimonial Home
    for an indeterminate period.  This is clearly inconsistent with the trial judges
    division of assets.  Further, the Husbands financial obligations under the
    trial judgment and as contemplated by these reasons are not trivial.  It may
    well be that resort by him to the funds generated by the equalization payment
    will be necessary to enable him to satisfy those obligations and avoid
    continuing arrears in support payments.

[83]

Accordingly,
    for the reasons given, I would allow the appeal in part.  The Husband is
    entitled to 50% of the proceeds of sale of the Matrimonial Home, less his 50%
    share of the maintenance costs of the Matrimonial Home from V-Day to the date
    of sale.  The Wife is entitled to a credit of $25,296 on account of the Husbands
    arrears in child and spousal support as of April 1, 2015, plus a further credit
    in the amount of any additional support arrears from April 1, 2015 to the date
    of these reasons.  In all other respects, I would dismiss the appeal.

[84]

If
    the parties are unable to agree on the quantum of any of the financial
    adjustments described above, I would refer the contested issues regarding
    quantum to the trial judge for determination.  Finally, I would specifically
    affirm paragraph 3 of the trial judgment, directing that the Matrimonial Home
    be listed for sale forthwith and that the net equalization payment, as
    recalculated in accordance with these reasons, be made to the Husband by the Wife
    from the net proceeds of the sale of the Matrimonial Home.

[85]

Success
    on this appeal being divided, I would make no order as to costs.

Released:

GP                                         E.A. Cronk
    J.A.

AUG 21 2015                          I agree K. Feldman
    J.A.

I agree
    Grant Huscroft J.A.


