



COURT OF APPEAL FOR ONTARIO

CITATION: Racco v. Racco, 2014 ONCA 330

DATE: 20140428

DOCKET: C56694

Gillese, Epstein and Benotto JJ.A.

BETWEEN

Josephine Racco

Applicant (Respondent)

and

Peter Racco

Respondent (Appellant)

Jeffery Wilson and Farrah
    Hudani, for the appellant

Geoffrey Wells and
    Christine Ashbourne, for the respondent

Heard: February 6, 2014

On appeal from the
    judgment of Justice John C. Murray of the Superior Court of Justice, dated
    January 31, 2013.

Benotto J.A.:

[1]

This appeal raises issues in connection with an award of lump sum
    spousal support. For the reasons that follow, I would dismiss the appeal.

Facts

[2]

The parties were married on June 24, 1989. They separated in 2011. They
    have two children who were teenagers at the time of trial. When the children
    were young, the respondent was their primary caregiver.

[3]

During their marriage the parties developed a very successful real
    estate business in the Oakville-Burlington area. The couple was associated with
    Royal LePage and marketed themselves as a team. In the later years of marriage,
    Team Racco generated annual gross real estate commissions well in excess of a
    million dollars. For the three years before separation, the parties combined gross
    commissions and net incomes reported on line 150 of their tax returns totalled:





Commissions

Line 150



2008:

$1,702,257

$527,211



2009:

$1,306,321

$377,286



2010:

$1,651,961

$319,696



[4]

The parties also jointly owned a management company which, at the time
    of separation, owned seven properties with a net worth of over a million
    dollars. Their business success allowed them and their children to enjoy a
    luxurious lifestyle.

[5]

Early in 2011, the appellant was charged with the sexual assault of a
    female employee. The parties separated shortly thereafter. The appellant immediately
    took steps to exclude the respondent from the home and the business. He changed
    the locks on the matrimonial home, redirected and cancelled their joint credit
    card, diverted all their joint commission cheques to himself, started his own
    real estate business and locked the respondent  out of the client data base. The
    appellant paid no child or spousal support for several months.

[6]

On May 4, 2011, the respondent commenced an application for divorce and
    corollary relief. The record reveals a high conflict divorce.

[7]

The appellants criminal trial for sexual assault in the fall of 2011
    was very public. The press attended and covered it in the local papers and
    online. He was convicted in October 2011.

[8]

Team Racco no longer existed. In November 2011, Royal LePage ended its
    association with the appellant. Another company hired him in January 2012, but
    the impact of the conviction and the publicity remained an impediment to his
    financial success.

[9]

The respondent did not return to real estate. She had been shut out of
    the business by the appellant. She was humiliated and devastated by the criminal
    proceedings. These circumstances made continuing in the real estate business difficult,
    if not impossible. She testified that she did not enjoy real estate in any
    event, and decided to devote her time to building a womens clothing business
    that she had previously operated as a sideline.

[10]

The
    parties settled all issues relating to their property and children. They went
    to trial in November 2012 on the issue of the respondents entitlement to
    spousal support.

The Trial Judgment

[11]

There
    was little factual dispute at trial. The trial judge found that after
    separation, the appellant had unilaterally terminated the couples partnership
    and kept for himself the 2011 real estate commissions of $663,000. The trial
    judge said of the appellant:

It is not disputed that the commission income earned by the
    parties in 2011, in whole or in large part, was diverted to the [appellant] for
    his use and [he] did not treat the [respondent] fairly on the termination of
    the partnership.

[12]

The
    trial judge found that the appellant will likely be less successful financially
    in the future as a result of his own criminal misconduct and also his unilateral
    termination of the partnership with the respondent. The trial judge found that
    as a practical matter, imputing significant income to the appellant for
    support purposes would be futile and thus a lump sum payment was the
    appropriate response to this practical reality. He imputed income after
    expenses to the appellant in the amount of $400,000 for 2011. The parties had
    previously agreed that the appellants income for child support purposes would
    be $150,000 from 2012 onwards. The trial judge found that had it not been for
    the criminal conduct of the appellant, his income for 2012 would have been
    substantially in excess of $150,000.

[13]

With
    respect to the respondents income, the trial judge found that she had elected
    to leave a lucrative career in favour of one that was not yet profitable and
    was thus not entitled to ongoing periodic support. She was, however, entitled
    to spousal support for a period (which he termed transitional) following the
    termination of the partnership by the appellant. The trial judge stated:

Her income loss, and the immediate change in her standard of
    living, was a direct consequence of the termination of the partnership.  The
    termination of the partnership by the [appellant] was a direct consequence of
    the marriage breakdown.



I agree that the [appellant] had an obligation to provide to
    the [respondent] spousal support immediately after termination of the partnership
    in order to provide her with a replacement income for a transitional period
    during which she could have explored other opportunities

[14]

After
    considering these circumstances, the trial judge awarded lump sum support in
    the amount of $200,000.

issues

[15]

The
    issues raised in this appeal are as follows:

1.

Was the
    respondent entitled to spousal support?

2.

Should the award
    have been a lump sum?

3.

Was the quantum
    of the lump sum excessive?

4.

What is the
    nature of transitional support?

[16]

The
    appellant sought to admit fresh evidence on the appeal showing that, after
    trial, his income did not exceed $150,000 and that the respondent returned to
    the real estate business.

[17]

I
    will begin with the fresh evidence application and then consider the four issues
    raised.

Fresh Evidence Application

[18]

The
    principles governing the admissibility of fresh evidence on appeal are outlined
    in
R. v. Palmer
, [1980] 1 S.C.R. 759. The Palmer test requires the
    applicant to satisfy four criteria: (i) the evidence could not have been
    adduced at trial; (ii) the evidence must be relevant in that it bears on a
    decisive or potentially decisive issue; (iii) the evidence must be reasonably
    capable of belief; and (iv) the evidence must be such that, if believed, it may
    have affected the result at trial.

[19]

The
    fourth criterion of
Palmer
is not satisfied. The evidence is not such
    that the result at trial would have been affected. If the respondent returned
    to real estate and earned more than anticipated, it would not matter because
    she was not awarded ongoing support. The appellants income after trial, as set
    out in the fresh evidence application, is in the range anticipated by the trial
    judge. Thus, this evidence would not have affected the result.

[20]

I
    would dismiss the fresh evidence application.

The Issues

[21]

The
    issues in this appeal must be considered in the context of the statutory and
    jurisprudential framework for spousal support.

[22]

The
Divorce Act
R.S.C 1985, c.3 (2
nd
Supp.), provides that an
    order for support should recognize, among other things, the advantages and
    disadvantages arising from the marriage or its breakdown and relieve any
    economic hardship of the spouses arising from the breakdown of the marriage.
    The objectives are set out in section 15.2(6):

An order made under subsection (1) or an interim order under
    subsection (2) that provides for the support of a spouse should

(a) recognize any economic advantages or disadvantages to
    the spouses arising from the marriage or its breakdown;

(b) apportion between the spouses any financial consequences
    arising from the care of any child of the marriage over and above any
    obligation for the support of any child of the marriage;

(c) relieve any economic hardship of the spouses arising
    from the breakdown of the marriage; and

(d) in so far as practicable, promote the economic
    self-sufficiency of each spouse within a reasonable period of time.

[23]

The
    Supreme Court of Canada has directed that these four objectives must be
    considered together in establishing an equitable sharing of the economic
    consequences of marriage breakdown. The courts have been repeatedly urged to
    not concentrate on one factor to the exclusion of the others. The factors are
    cumulative, not alternative.

[24]

In
Moge v. Moge,
[1992] 3 S.C.R. 813, the court established the
    compensatory model of support. This was followed by
Bracklow v. Bracklow,
[1999] 1 S.C.R. 420, which formally recognized compensatory, non-compensatory,
    and contractual entitlements to support. Generally speaking, compensatory
    support focuses on the advantages and disadvantages flowing from the marriage
    or its breakdown, while non-compensatory support focuses on need.

[25]

The
    application of these principles makes the determination of spousal support
    highly individual and discretionary. As Professors Rogerson and Thompson state
    in their introduction to the
Spousal
    Support Advisory Guidelines
(Ottawa: Department of Justice, 2008)
    (SSAG):

Bracklow
emphasized the highly discretionary,
    individualized nature of spousal support decisions.  The Court was clear that
    the
Divorce Act
endorses no single theory of spousal support and must
    retain flexibility to allow judges to respond appropriately to the diverse
    forms that marital relationships can take. The Court presented spousal support
    determinations as first and foremost exercises of discretion by trial judges
    who were required to balance the multiple support objectives and factors
    under the
Divorce Act
and apply them in the context of the facts of
    particular cases.

[26]

With this background,  I turn to the
    specific issues in the appeal.

(1)

Was the respondent entitled to spousal support?

[27]

The
    trial judge found that the respondent was not entitled to ongoing spousal support
    because she was capable of achieving self-sufficiency at some point in the
    future. However, he found that she had experienced economic disadvantage as a
    result of the marriage and its breakdown and economic hardship that arose from
    the breakdown of the marriage. The trial judge considered the following
    evidence:

·

The parties had enjoyed a lavish lifestyle;

·

Their business produced annual gross commissions of over one
    million dollars for a  number of years;

·

The appellant shut the respondent out of the business after
    separation;

·

The appellant paid nothing to the respondent for 8 months after
    the separation when she was most vulnerable financially;

·

Thereafter the appellant paid interim support which included both
    child and spousal support on a without prejudice basis;

·

The appellant unilaterally terminated the partnership, unfairly
    deprived the respondent of her share of the proceeds, repudiated the 
    respondents efforts to find a way to continue the business and locked her out
    of the data base of clients;

·

The appellant unfairly took for himself $633,000 in commission
    which should have been shared; and

·

The appellant filed an income tax return erroneously showing that
    the respondent received $152,000.

[28]

On
    the record, it was open to the trial judge to find an entitlement to spousal support
    which would include retroactive support, non-compensatory and compensatory
    support.

[29]

The
    appellant argues that the trial judge incorrectly considered the appellants misconduct
    in awarding support. Section 15.2(5) of the
Divorce Act
requires that
    the court not take into consideration any misconduct of a spouse in relation
    to the marriage. The misconduct referred to in the section is specified as
    misconduct in relation to the marriage. It does not preclude a court from
    considering relevant misconduct outside the marriage. Consequently, I see no
    error in the trial judge considering the appellants criminal conduct which led
    to economic hardship for the respondent. By referring to the appellants
    conduct, the trial judge did not contravene section 15.2(5).

(2)

Should the award have been a lump sum?

[30]

The
    trial judge was required to fashion an appropriate award of spousal support
    within the unique circumstances of this case. He balanced the support
    objectives with a view to the self-sufficiency of the respondent. The award of
    support included elements of both compensatory support for the economic disadvantage
    suffered by the respondent as a result of the marriage and its breakdown, and
    non-compensatory support as a result of the economic hardship arising from the
    breakdown of the marriage

[31]

This
    was an appropriate case for a lump sum payment. The appellant has an ability to
    pay. There was a high level of animosity between the parties, a history of
    non-payment by the appellant, the possibility that the appellants financial
    situation would continue to be precarious, the desirability of terminating personal
    contact, the need to effect a retroactive award of support and the need to provide
    capital to the respondent. These factors support a lump sum award. It was for
    the trial judge to consider all of them and exercise discretion in addressing
    the individual circumstances of the parties. This was confirmed in
Davis v.
    Crawford,
2011 ONCA 294, 95 R.F.L. (6th) 257, at paragraph 69:

In the end, it is for the presiding judge to consider the
    factors relevant to making a spousal support award on the facts of the
    particular case and to exercise his or her discretion in determining whether a
    lump sump award is appropriate and the appropriate quantum of such an award.

[32]

On
    the record, the trial judge was fully justified in exercising his discretion
    and ordering a lump sum payment.

(3)

Was the quantum of support excessive?

[33]

The
    appellant submits that the quantum of support cannot stand because the trial
    judge gave no indication of how he arrived at the amount. In addition, the
    appellant submits that the amount is excessive.

[34]

The
    appellant submits that the trial judges reasons are deficient because he did
    not indicate the amount of income that he was attributing to the parties for
    the purpose of calculating spousal support, or indicate the duration of the
    support that he called transitional. Although the SSAG were argued, he did not
    refer to them.

[35]

It
    would have been preferable had the trial judge referred to these matters in his
    reasons. However, the reasons demonstrate that he considered the objectives of
    section 15 of the
Divorce Act
. The trial judge did not misapprehend
    the evidence or commit an error in principle: see
Hickey v. Hickey
[1999]
    2 S.C.R. 518. Deference is therefore accorded to the trial judge when, as here,
    there is a clear apprehension of the evidence, an identification of the
    objectives of the support award and a balancing of the factors supporting the
    award.

[36]

I
    do not accept that the spousal support order is so high it warrants
    interference. The respondents share of diverted commissions alone would exceed
    $300,000. Even assuming the highest tax rate, the respondent would have received
    $150,000. She would also have been entitled to a consideration of the other
    elements of economic loss suffered.

[37]

The
    amount can also be tested against the SSAG. The appellant argued that, on the
    basis of income for the appellant of $400,000 and the respondent of $50,000, a
    suggested lump sum support would be approximately $12,000 to $55,000. This
    however, was based on a one-year term. The appellants submissions that the
    quantum of the lump sum should be measured against a one-year term of support
    is not supported by the evidence or by the objectives of the
Divorce Act
.
    During the first year after the separation, the respondent could not have realistically
    achieved self-sufficiency: she moved homes, was prevented from working in the
    business, was involved in matrimonial litigation and subjected to the
    humiliation of the publicity of the criminal trial. I note that the SSAG
    suggest a lump sum payment of between $180,000 and $220,000 for a term of four
    years.

(4)

What is the nature of Transitional Support?

[38]

I
    turn now to address the trial judges description of the award as transitional
    support. In my view, this description does not reflect what the trial judge
    actually awarded. For that reason, I address the concept of transitional
    support and its connection to limited-term support.

[39]

Transitional
    support is not a category of support. It is a word that is sometimes used to
    describe a spousal support award that is for a brief period of time, in other
    words, a short limited-term support award. It was the word transitional that
    appears to underlie the appellants submission that the amount of the award was
    excessive. Since the  phrase transitional support is vernacular rather than a
    recognized legal term, it is generally not advisable to use it.

[40]

A
    limited-term support award is generally designed to enable the recipient, after
    a short term marriage, to either achieve self-sufficiency or adjust to a lower
    standard of living. According to
Moge
, limited-term support should be
    rarely awarded in marriages of long duration. Where limited-term support is
    awarded after a long term marriage, particularly one with children, the term
    must be long enough to satisfy the objectives of the
Divorce
Act.

[41]

In
Fisher v. Fisher
2008 ONCA 11,

the parties had been married for 19 years and had no children. At the time
    of separation, the wife was 41 and the husband was 42. The trial judge made a
    step-down support order which provided support at decreasing amounts for three
    years followed by a review, if requested. Since the wife had received interim
    support, the total term of support was four years. This court set aside the
    trial award and substituted a support order for an increased amount and for a
    term of seven years, without the possibility of a review. Although the marriage
    was lengthy, the court considered that after a period of seven years, the wife,
    who was still young, would either earn a higher income or adapt to a different
    lifestyle.

[42]

The
    SSAG provide lump sum calculations for limited-term support of up to four
    years. In
Fisher,
the
award
    was for seven years. Here the term of support must recognize  a long-term
    marriage, with dependent children.

Conclusion

[43]

The
    trial judges reasons, read as a whole, in the context of the evidence before
    him, support the conclusion that the lump sum award incorporated elements of
    compensatory, non-compensatory, and retroactive support. This accorded with the
    principles mandated by section 15 of the
Divorce Act
and
    jurisprudential precedent.

[44]

The
    principles articulated in the Supreme Court of Canada in connection with the
Divorce
    Act
provide a framework within which equitable support awards are to be
    made. Although the SSAG offer a certain level of predictability and consistency
    once the basis for entitlement has been established, they are advisory only. The
    court cannot lose sight of the individual circumstances of a case in
    determining both entitlement and quantum under section 15 of the
Divorce
    Act
.

[45]

This
    was a marriage of long duration. The parties lived a lavish lifestyle. Together
    they built a successful business. The consequences of the appellants conduct ended
    the financial success of the business, and disrupted the respondents ability
    to support herself financially.

[46]

The
    reasons of the trial judge make it clear that he considered these factors in
    arriving at an award which recognized the advantages and disadvantages arising
    from the marriage and its breakdown as well as the economic hardship arising
    from the breakdown of the marriage.

[47]

I
    see no basis on which to interfere with the $200,000 lump sum payment to the
    respondent ordered by the trial judge.

[48]

The
    appellant has also appealed the trial judges award of costs. In light of these
    reasons, there is no basis to interfere with the award of costs.

DISPOSITION

[49]

I
    would dismiss the appeal with costs payable to the respondent in the amount of
    $15,000, inclusive of disbursements and taxes.

M.L. Benotto J.A.

I agree E.E. Gillese
    J.A.

I agree Gloria
    Epstein J.A.

Released: April 28, 2014


