



COURT OF APPEAL FOR ONTARIO

CITATION:
Patton-Casse v. Casse, 2012 ONCA 709

DATE: 20121025

DOCKET: C55108-C55110

OConnor A.C.J.O., Armstrong and Juriansz JJ.A.

BETWEEN

Kathleen Patton-Casse

Applicant (Appellant)

and

Mark Casse

Respondent (Respondent in appeal)

Sarah M. Boulby, for the applicant (appellant)

Gary S. Joseph and Kristy A. Maurina, for the respondent

Heard: October 9, 2012

On appeal from the order of Justice McDermot of the
    Superior Court of Justice, dated October 20, 2011.

By the Court:

[1]

This case involves the appeal of an arbitration award settling matters
    of child and spousal support.  The appeal decision was further appealed to this
    court.  This is an unusual case in that the arbitration agreement between the
    parties left the door open for continuing litigation by agreeing that either
    party could appeal the award on a question of law, a question of fact or a
    question of mixed law and fact.  The appeal judge held that there were errors
    of mixed fact and law in the arbitrators reasons.  He proceeded to substitute
    his own conclusions for several of the arbitrators.

[2]

After nine years of marriage and the birth of three children, the
    parties separated and then divorced.  They resolved financial and
    custody/access issues by way of a consent order dated October 15, 2001 issued
    by James J. (the 2001 order).  The 2001 order provided for Casse to pay fixed
    spousal support for four years and child support for five years.

[3]

In 2003, the former wife (Patton) brought a motion for financial
    disclosure before Perkins J.  Her motion was denied.  This order (the 2003
    order) becomes significant in the context of later events.

[4]

In November 2005, Patton brought a motion to vary the terms of the 2001
    order.  She sought retroactive child support and ongoing child and spousal
    support.  She argued that there were two material changes in circumstances: 
    her horse training business had failed and her eldest son was diagnosed with
    Aspergers Syndrome, which resulted in increased child care responsibilities.

[5]

The matter proceeded by way of arbitration before the Honourable Dennis
    Lane, Q.C.  The arbitrator heard five days of evidence and then awarded Patton
    retroactive and prospective child support in amounts greater than those
    provided in the 2001 order.  He also awarded retroactive spousal support from
    the date of the commencement of the motion and prospective spousal support
    until December 31, 2014 and subject to further extension if appropriate.

[6]

The arbitration agreement provided that the parties may appeal the award
    of an arbitrator to a Superior Court judge on questions of law, mixed fact and
    law and fact.  Casse appealed.

[7]

McDermott J. (the appeal judge) allowed the appeal in part.  He set
    aside or varied several aspects of the arbitrators award.

[8]

Both parties sought and obtained leave to appeal parts of the appeal
    judges order.  By this endorsement, we dismiss both appeals.

STANDARD OF REVIEW

[9]

The appeal judge correctly identified that the appeal was one of mixed
    fact and law and that the rights of appeal in the arbitration agreement were
    unlimited.  That is, while the
Arbitration Act
, 1991, S.O. 1991, c.
    17, significantly limits the appeals of arbitration awards, it does permit the
    parties to contract out of this limitation by specifically agreeing to more
    wide-ranging appeal rights.  This is what happened here.  In this case, the
    Agreement to Arbitrate dated June 25, 2009 stated that either party may
    appeal the award on a question of law, a question of fact or a question of
    mixed law and fact.

[10]

The appeal
    judge then referred to the standard of review articulated in
Housen v.
    Nikolaisen
, [2002] 2 S.C.R. 235 at para.37 for questions of mixed fact and
    law, where the question is subject to a standard of palpable and overriding
    error unless it is clear that the trial judge made some extricable error in
    principle with respect to the characterization of the standard or its
    application, in which case the error may amount to an error of law.  He also
    adverted to the deference owed to the fact-finder emphasized in
Hickey v.
    Hickey
, [1999] 2 S.C.R. 518 at paras. 10 to 12 inclusive.

[11]

Finality
    is particularly important in family law cases and the benefits of a final
    resolution  imperfect as it may be - to the parties and their children cannot
    be overstated.

[12]

In a case
    such as this, however, in which the parties must be presumed to have made a
    fully informed decision to agree to leave the door open to appeal the
    arbitrators award, the appeal judge was not mistaken in his articulation of
    the applicable standard of review.

[13]

In so far
    as the appeal judge found errors in the arbitrators application of the law to
    the facts, we agree that these errors entitled the appeal judge to intervene. 
    Having done so, the appeal judges exercise of discretion is entitled to
    deference and we see no reason to further interfere.

retroactive child support

[14]

The
    arbitrator awarded Patton retroactive child support in the amount of $55,473
    for the period from 2002 to 2007.  The appeal judge set this award aside.  We
    agree with the appeal judge that the arbitrator did not properly apply the
    analysis required by the Supreme Court of Canada in
D.B.S. v. S.R.G.
,
    2006 SCC 37, in making the award.  In particular, the arbitrators reasons make
    it unclear how the four factors set out by the majority in
D.B.S.
affected
    his decision. These are (1) the reason for the recipient parents delay in
    seeking child support; (2) the conduct of the payer parent (blameworthy
    conduct); (3) the past and present circumstances of the child including the
    childs needs at the time the support should have been paid; and (4) whether
    the retroactive award might entail hardship to the payor.

[15]

In the
    appeal judges view, the arbitrator may have attached weight to Casses failure
    to disclose his income in 2003 despite a court order supporting him in this.

[16]

We agree
    with the appeal judge that it would have been incorrect for the arbitrator to
    have in any way considered Casses failure to disclose in reliance on a court
    order as blameworthy.  In his order, Perkins J. directed that:

This court orders that the order of Justice James dated October
    15, 2001 is fixed and invariable for five (5) years and that the income of the
    respondent [Casse] is irrelevant to his obligations No Order for disclosure of
    tax returns during that period.

[17]

We recognize
    that this order may not have been effective by virtue of s. 25(8) of the
Child
    Support Guidelines
.  However, we do not find it necessary to determine
    that issue.  Patton did not appeal the order.  In these circumstances, we agree
    with the appeal judge who said under the circumstances, I cannot find that Mr.
    Casse was guilty of blameworthy conduct in failing to disclose his income when
    the court ordered that he did not have to do so.

[18]

While it
    is not necessary in every case in which a court makes an order for retroactive
    child support pursuant to a
DBS
analysis that some element of
    wrongdoing or blameworthiness be shown on the part of the payor, we see no
    basis to interfere with the appeal judges decision to set aside the
    retroactive child support award in the circumstances of this case.

spousal support

[19]

The
    arbitrator ordered that spousal support should be restored from November 1,
    2005  the date on which the support ordered in 2001 expired, until December
    31, 2014, at which point it could be reviewed, as follows: lump sum for the
    period ending December 31, 2007 fixed at $151,000 representing 12 months at
    $5,000 and 13 months at $7,000 and periodic support payable from January 1,
    2008 forward fixed at $9,000/month.

[20]

The appeal
    judge upheld the arbitrators decision to award spousal support after the
    expiration of the 2001 order.  Casse does not challenge this finding.

[21]

As to the
    amount of retroactive spousal support awarded, the appeal judge concluded that
    the arbitrator had misunderstood the tax implications to the parties of
    awarding a retroactive lump sum spousal support payment.  In particular, the
    arbitrator stated in his reasons that the tax laws had changed with effect from
    January 2008 so that spousal support payments were now tax deductible to the
    payor and taxable in the hands of the payee.  This statement of the law is
    incorrect.  There was no such change in the taxation of spousal support. The
    parties agree.  Accordingly, since neither of the parties asked that the matter
    be returned to the arbitrator, and it was not apparent from the arbitrators
    reasons how his misunderstanding of the applicable tax laws figured into his
    calculation of the amount of support owing, it was open to the appeal judge to
    approach the issue afresh.

[22]

The appeal
    judge reasoned that since the retroactive lump sum payment ordered was not
    deductible for Casse, he would in effect pay more now than he would have had
    the amounts been paid on a periodic basis such that he could benefit from the
    tax deduction.  The difficulty the appeal judge faced, however, is that due to
    Pattons lower marginal tax rate, the value of Casses lost deduction exceeded
    that of Pattons tax saving.  In this way, no adjustment to the lump sum
    retroactive award could place both parties in the position they would have been
    in had the payment been deductible and taxable.

[23]

In these
    circumstances, the appeal judge decided to award an amount of $177,000.  That
    amount was approximately midway between the positions of the parties.  In doing
    so, he considered all of the surrounding circumstances, including Pattons
    needs and Casses ability to pay.  On this appeal, both parties take issue with
    the appeal judges approach.

[24]

In our
    view, it was within the appeal judges discretion to adopt the approach he did. 
    We see no basis to interfere.

[25]

As to the
    prospective spousal support, the appeal judge reduced the amounts awarded by
    the arbitrator and reduced the duration of the award such that no spousal
    support would be payable after June 30, 2011.

[26]

In our
    view, it was open to the appeal judge to intervene.  As he pointed out, in
    spite of evidence before him that Casses post-separation income was
    attributable to effectively new employment, the arbitrator failed to consider,
    as he should have, the question of what part of Casses post-2005 period was
    disconnected from Pattons efforts during the marriage.  The appeal judge put
    it this way: His failure to do so is a reviewable error, as post-separation
    increases in income have to at least be analyzed in order to determine whether
    they are related to the marriage:  see the annotation by James G. MacLeod to
Rozen
    v. Rozen
, 2003 Carswell B.C. 1564 (C.A.) where in the author states:

Automatically sharing post-separation increases in income as
    akin to treating a job as if it were a family asset, shareable in specie. 
    Rather than doing so as a matter of course, courts should investigate whether
    there is sufficient relationship between the increased income and the payees
    efforts during marriage to justify allowing him or her to share in the
    increase.

[27]

Given this
    conclusion, we are satisfied it was open to the appeal judge to consider anew
    the issue of the amount of prospective spousal support and the duration of that
    support.  We see no error in his reasoning with respect to the conclusions that
    he reached.

the $21,600 overpayment

[28]

The
    arbitrator concluded that while Casse had inadvertently continued to pay
    $1,000/month for daycare for two years longer than required, he was not
    entitled to the reimbursement of $21,600.  This conclusion was based on the
    parties agreement in the Joint Statement of Issues for Trial in which they
    restricted claims with respect to s. 7 expenses to those incurred after May 1,
    2009.

[29]

The appeal
    judge, on the other hand, interpreted the Joint Statement of Issues for Trial
    as permitting Casses claim for overpayment under James J.s order. The appeal
    judge held that Casse was entitled to credit for the overpayment in the amount
    of $21,600 assuming proof of payment.

[30]

We do not
    see any reason to interfere with the appeal judges conclusion on this point
    either.

costs

[31]

Having
    made significant changes to the arbitrators award, the appeal judge reduced
    the arbitrators award of costs of the arbitration from $292,229.45 ($194,056
    in costs and $108,173 for forensic accounting fees) to $179,377.20.

[32]

Guided by
    Rules 18 and 24 of the
Family Law Rules
, O. Reg. 114/99 and
    considering that Casse claimed costs of the appeal in the amount of $25,000 and
    that he had some success on the appeal, he found that Pattons costs of the
    appeal should be set off against her costs of the arbitration of $179,377.20
    for a total of $157,202.20.

[33]

Significantly,
    Rule 49 offers played an important role in the arbitrators award of costs for
    the arbitration.  Those offers were no longer a factor after the appeal judges
    order.

[34]

We are of
    the view that the appeal judge properly exercised his discretion in making the
    costs award for the arbitration.

costs Of the appeal

[35]

The
    parties agreed that if one side or the other was totally successful, the appeal
    costs should be fixed in the amount of $20,000.

[36]

Both appeals are dismissed.  The grounds raised in Pattons
    appeal were far more substantial than those in Casses appeal.  We order the
    costs of the appeals, including the leave to appeal motions, to be fixed in the
    amount of $15,000 in favour of Casse, inclusive of disbursements and HST.


Released:  OCT 25 2012

DOC

D. OConnor A.C.J.O.

Robert P. Armstrong J.A.

R.G. Juriansz J.A.


