Date: 19971030 Docket: CA131737
NOVA SCOTIA COURT OF APPEAL
Cite as: Prince v. Prince, 1997 NSCA 144
Clarke, C.J.N.S.; Roscoe and Bateman, JJ.A.
BETWEEN:
SEYMOUR PRINCE ) Douglas Campbell, Q.C.
) for the Appellant
Appellant )
)
)
- and - )
)
) G. Douglas Sealy and
) Valerie MacKenzie
) for the Respondent
)
LINDA MARILYN PRINCE )
)
Respondent )
)
) Appeal Heard:
) October 6, 1997
)
) Judgment Delivered:
) October 30, 1997
)
)
)
THE COURT: The appeal is allowed in part, per reasons for judgment of Bateman, J.A.; Clarke, C.J.N.S., and Roscoe, J.A., concurring.
BATEMAN, J.A.:
This is an appeal and cross-appeal from the trial judgment of Justice Davison of the Supreme Court, fixing maintenance, child support and the division of assets on divorce.
BACKGROUND:
The parties married June 12, 1988 and separated, as found by the trial judge, on January 10, 1993.
At the time of the marriage the appellant husband, Seymour Prince, was self- employed, being the owner of a proprietorship known as Prince Financial Consulting. He was, as well, employed by a company owned by his father. The husband’s salary from that employment is paid to Prince Financial Consulting. Both businesses are engaged in property rental and the loaning of money secured by mortgages on real estate. The respondent wife, Linda Marilyn Prince, is a chartered accountant and was employed at the time of marriage. She continued her employment until the birth of the parties' only child, Sarah Noreen Prince, on September 5, 1991.
Both parties were represented by counsel at the divorce proceeding which was heard over three days in June of 1995. Understanding that the parties had agreed on the value and characterization of the marital assets, the judge determined that there would be equal division of the assets and rendered his decision on access, child support and maintenance on July 25, 1995 (reported at (1995), 144 N.S.R. (2d) 47). The parties were unable to agree on the form of Order. After several communications between the parties and the Court, the judge directed that the trial would be re-opened for the hearing of additional evidence in relation to the asset division. In June of 1996 the judge heard three further days of evidence. At this proceeding, the wife was no longer represented by counsel. The judge delivered a supplementary decision on August 15, 1996 (reported at (1996), 153 N.S.R. (2d) 356).
The wife has custody of the child and resides in Toronto where she has resumed employment. The husband remains in Halifax, and continues to operate his business.
Counsel on the appeal did not represent the parties at trial.
GROUNDS OF APPEAL:
The husband appealed, raising the following issues:
1. Whether the Learned Trial Judge erred in fact or in law in classifying the capital account of Prince Financial Consulting as a matrimonial asset and consequently dividing it in equal shares.
2. Whether the Learned Trial Judge erred in fact or in law in the valuation of the matrimonial home of the parties by failing to account for disposition costs.
3. Whether the Learned Trial Judge erred in fact or in law by awarding lump sum maintenance in any amount, or, in the alternative, by awarding lump sum maintenance in an excessive amount.
4. Whether the Learned Trial Judge erred in fact or in law by awarding child support in an amount which is excessive.
5. Whether the Learned Trial Judge erred in fact or in law by requiring the appellant to maintain an insurance policy and/or by requiring the appellant to designate as beneficiary the respondent as trustee for the child of the marriage.
The wife has cross-appealed:
1. Whether the Learned Trial Judge erred in fact or in law in classifying the RRSP contribution made by Mr. Prince on January 6, 1993 as a non-matrimonial asset.
2. Whether the Learned Trial Judge erred by not including a clause relating to extraordinary expenses and how they are to be paid or shared by the parties.
STANDARD OF REVIEW:
In Moge v. Moge (1992), 43 R.F.L. (3d) 345 (S.C.C.) L'Heureux-Dubé, J., at p. 359, accepted the following statement of Morden J.A. in Harrington v. Harrington (1981), 33 O.R. (2d) 150, at p. 154:
As far as the applicable standard of appellate review is concerned I am of the view that we should not interfere with the trial Judge's decision unless we are persuaded that his reasons disclose material error and this would include a significant misapprehension of the evidence, of course, and, to use familiar language, the trial judge's having"'gone wrong in principle or (his) final award (being) otherwise clearly wrong": Attwood v. Attwood, [1968] P. 591 at p. 596. In other words, in the absence of material error, I do not think that this Court has an 'independent discretion' to decide afresh the question of maintenance and I say this with due respect for decisions to the contrary . . .
Chipman, J. A. wrote, for the Court, in Edwards v. Edwards (1995), 133 N.S.R. (2d) 8 (N.S.C.A.) at p. 20:
Having regard to all the evidence and particularly the respective incomes of the parties, I cannot say that the trial judge erred in his assessment. This court is not a fact finding tribunal. That is the role of the trial judge. Ours, as has been said many times, is a more limited role. We are charged with the duty of reviewing the reasons of the trier of fact with a view of correcting errors of law and manifest errors of fact. The degree of deference accorded to the trial judge with respect to factual findings is probably no higher anywhere than it is in matters relating to family law. Hart, J.A. put it well when he said on behalf of this court in Corkum v. Corkum (1989), 20 R.F.L. (3d) 197 at 198:
In domestic matters the trial judge always has a great advantage over an appellate court. He sees and hears the witnesses and can assess the emotional aspects of their testimony in a way that is denied to us. Unless there has been a glaring misconception of the facts before him or some manifest error in the application of the law, we would be unwise to interfere.
(Emphasis added)
A similar standard is applicable to appeals from a division of assets made pursuant to the Matrimonial Property Act, R.S.N.S. 1989 c. 275.
ANALYSIS:
(i) The Capital Account:
The principal issue in this appeal centers upon the division of the “capital portion” of Prince Financial Consulting.
The respondent wife had agreed, prior to the 1995 hearing, that she would not “make a claim on the business assets”. At the conclusion of the first hearing the judge found that the “evidence does not establish any significant contribution by the wife to the business”. The respondent wife reopened this issue during the 1996 hearing, at which time she explained her position. In this regard she said:
I’m saying that, the, the parties were in agreement prior to the trial last year that I would have no claim on the business assets. I didn’t say anywhere that the capital portion of the investment in Prince Financial Consulting, whatever you want to call it, is a business asset. . . . The issue is whether the capital portion of Prince Financial Consulting is a matrimonial asset. If Your Lordship determines that it is a matrimonial asset, then it be divided according like all the other items. If Your Lordship determines that it is a business asset, then yes, it’s correct to say that I’m not entitled to any portion of that. That’s my position.
The issue before the trial judge, then, was whether Prince Financial Consulting was a business asset.
In determining that the so-called “capital portion” of PFC was a matrimonial asset and subject to equal division, the judge said:
[para32] Mr. Prince has a business which he conducts under the name of Prince Financial Consulting (PFC). This is a sole proprietorship. The assets, expenses and capital of PFC are the assets, expenses and capital of Mr. Prince.
[para33] There is a controversy about the status of an amount of money which is described as "the capital portion" of PFC. Until written submissions of counsel were received the amount of this item was stated to be $69,509.00. In recent written submissions from Mr. Prince's solicitor it is requested that certain adjustments eliminate this amount and eliminate the petitioner's claim. These adjustments are re‑assessments from Revenue Canada, the sum awarded by the Court for the Honda motor vehicle in the amount of $11,000.00 and some adjustment of $12,500.00 for the RRSP the Court found to be non‑matrimonial. Mrs. Prince seems happy to give effect to reductions but states Mr. Prince failed to evaluate additional income in accordance with Revenue Canada's re‑assessment for three years which she states makes the figure, as of December 31, 1992, amount to $109,833.39.
[para34] The evidence was the "capital portion" was $69,509.00. That figure was also on the financial statements. Both parties were aware that there were figures which could be used for re‑adjustments of the sum but made no reference to such re‑adjustments. I am not going to change the figure. It seems fair to me from the point of view of both parties that I consider the "capital portion" in accordance with the evidence and the statement to be $69,509.00.
[para35] In the Matrimonial Property Act matrimonial assets are defined by s. 4 which reads:
4(1) In this Act, "matrimonial assets" means the matrimonial home or homes and all other real and personal property acquired by either or both spouses before or during their marriage with the exception of
. . .
(e) business assets.
Business assets are defined by s. 2(a) as follows:
2(a) "business assets" means real or personal property primarily used or held for or in connection with a commercial, business, investment or other income or profit‑producing purpose, but does not include money in an account with a chartered bank, savings office, loan company, credit union, trust company or similar institution where the account is ordinarily used for shelter or transportation or for household, educational, recreational, social or athletic purposes.
[para36] In Curren v. Curren (1987), 81 N.S.R. (2d) 118 I stated at p. 123:
The real contentious issue involves characterizing the two promissory notes or the proceeds therefrom. I use the word "characterizing" advisedly because it would be easy to fall into the trap of attempting to fit assets into one of two "pigeonholes" ‑ matrimonial assets or business assets. It is my view, with respect, that one starts with the presumption that "all . . . property acquired by either or both spouses before or during their marriage . . ." are matrimonial assets and that it is incumbent on one who asserts that a particular asset is not a "matrimonial asset" to prove that the asset falls within the exceptions set forth in s. 4(1).
This paragraph was quoted with approval by the Supreme Court of Canada in Clarke v. Clarke, [1990] 2 S.C.R. 795. I made similar comment in McNulty v. McNulty (1989), 94 N.S.R. (2d) 387. Both of these cases were cited by the Nova Scotia Court of Appeal in Best v. Best (1991), 102 N.S.R. (2d) 61 where Freeman, J.A. stated at p. 63:
The burden of proving an asset is not a matrimonial asset rests on the party making the allegation.
[para37] The "capital portion" was acquired by Mr. Prince. It remained the asset of Mr. Prince. The burden is on Mr. Prince to show it should be excluded from the category of matrimonial assets because it falls within the exception of business assets by virtue of s. 4(1)(e).
[para38] In Clarke v. Clarke, [1990] 2 S.C.R. 795 the Supreme Court of Canada considered the category of business assets as used in our Matrimonial Property Act. Wilson, J. stated that Hart, J.A. in Laurence v. Laurence (1981), 25 R.F.L. (2d) 130 concluded that the "only assets which fall within the definition of business assets are those that are purposely held for or used for the production of income or profit". Wilson, J. said that "business assets are assets which have as their purpose the generation of income in an entrepreneurial sense".
[para39] What is the evidence adduced on which Mr. Prince can say the "capital portion" was held or used for the production of income or profit? Has Mr. Prince satisfied the burden on him to prove the purpose of the "capital portion" is the generation of income in an entrepreneurial sense? There was little evidence on the use and purpose of the money. Mrs. Prince said funds of hers went into the business and when required for matrimonial purpose, came out of the business.
[para 40] I find that Mr. Prince has not met the burden. The sum of money is simply an account Mr. Prince maintains and which he chooses to keep in his business accounts. Taxes have been paid on the sum. It is not an asset which generates income or a profit. Mortgages are assets which generate income for the business. Mr. Prince stated in his evidence that money for the couple's joint account came from taking money from the business. I accede to the description given to the money by Mrs. Prince when she says it is no different from a personal bank account of Mr. Prince. It could have been brought home for matrimonial purposes at any time.
[para 41] In McNulty v. McNulty (supra) I did express concern about the possibility that a husband can retain moneys on business books with a view to having moneys declared a business asset. I stated at p. 391:
It is easy to see the evil that would be encouraged if courts simply labeled assets which were connected with a business as "business assets" without a more careful analysis of the use to which the assets are put or held.
I pointed out s. 4(4) of the Matrimonial Property Act which permits the piercing of the corporate veil to effect close inquiry as to the purpose shares are held.
[para42] Mrs. Prince testified that during her marriage all her money was used for matrimonial purposes and Mr. Prince's money went into the business. That is not to say that Mr. Prince attempted to thwart the provisions of the Matrimonial Property Act or that this arrangement was made in any way to purposely divest Mrs. Prince from moneys to which she is entitled. But it is clear that a spouse is entitled to a share of money in a business account which is not used to generate income or a profit. The evidence has not established the fund falls within the definition of "business asset" as that term is defined by Justice Hart and Justice Wilson.
[Emphasis added]
It is clear from the above quotation that the trial judge thought that the “capital portion”, so called, was money in a bank account. In fact, the “capital portion” is the book value of Prince Financial Consulting if liquidated. The assets of PFC consist of rental properties and mortgages receivable. There are, as well, liabilities. The difference between the assets and liabilities is called, in accounting terms, capital. This is the net value of the business, not money in the bank. As it happened, PFC did not have any net bank balance. All of its “capital” was tied up in rental properties or mortgages. Different values can be assigned to the capital of a business, depending upon the accounting approach used. Here, the $69,501 represented the book value of the business, with the assets valued at cost plus improvements, less depreciation. The capital might also be calculated using the market value, rather than the book value of the assets, in which case a different capital value would result. Indeed, Mr. Prince estimated the market value of the business to be $199,000. The appellant attempted to make this clear in his evidence, however, the issue was obscured by the questioning of the respondent wife, who is a chartered accountant. The resulting confusion by the trial judge is understandable. The following extract from the trial transcript is relevant. Linda Prince, acting on her own behalf is cross-examining Seymour Prince:
Q. We’ve established that the name of your business was Prince Financial Consulting. Who owns the business?
A. Seymour, myself.
Q. What type of business is it?
A. It’s a mortgage brokerage business and as well as a rental business.
Q. And is this business incorporated?
A. No.
Q. So therefore you’d say it’s a proprietorship?
A. That’s correct.
Q. So basically I just want to confirm. I know I said this in my testimony, but I wanted to make sure that you’re in agreement that therefore the business is actually you.
A. That’s right. Prince Financial Consulting is Seymour Prince. It’s a registered agency.
Q. Is the income from the business included in your personal tax return?
A. Yes, it is.
Q. Therefore, is it true, Mr. Prince, that you personally pay the taxes on any income that the business makes?
A. Yes.
Q. Is it true that you have the right to take out any profits of the business as you have personally paid the income tax on it?
A. I have full control over the funds of Prince Financial.
Q. So is it then true to say that you have made a decision to leave the profits in the business as your investment?
A. I do not keep all the profits in my business. I have full control. I paid -- as it came out in evidence, I paid for 90, 95% of all the personal expenditures you and I incurred.
Q. Basically what I’m -- okay. Well, it’s been given already in the Court records that at December 31, 1992 on your balance sheet you said it shows that your capital -- your investment in Prince Financial Consulting is 69,509. Are you disputing that, or do you agree with that?
A. I agree with that. I don’t know the exact figure, but in that vicinity.
Q. Like I say, it’s in the Court documents and I can produce it as evidence.
A. If it’s on my statement, it’s 100% correct.
Q. So that suggested figure of 69,509 which shows on your December 31, 1992 income tax and your financial statements with that return. So therefore is it true that the sixty-nine thousand, five hundred and nine dollars ($69,509.00) is an after tax investment that you could take out and invest in anything you wanted, GICs or bonds or anything?
A. I wouldn’t class it as an after tax investment. It’s a book value. It’s assets over liabilities.
Q. That’s what I asked you, and I don’t agree.
A. Well, I’m not -- if it was incorporated, it would be shareholders’ equity. Since I’m a sole proprietor, it’s capital. It’s the assets less my liabilities.
Q. So when I asked you --
A. Some of it is my so-called after tax profits or income. But sometimes I pay down my mortgages, too, so that would increase my capital.
Q. All right. Well, then, would you not agree that the reason that you pay your personal expenses out of the business is to use your capital investment in the business because you’ve not taken it out and you have a right to do that?
A. That’s not correct. It is true some -- from paying like the oil bill and a few other properties and our matrimonial home I might pay through the business, but that part on this cheque stub goes under withdrawal.
Q. That’s right. It’s withdrawals out of that investment money.
A. Well, where did we get the money from the joint account? I used to take money out of the business and put it into our joint account. So for simplicity, instead of putting the money in and writing another cheque, I would mark it under withdrawals.
Q. So the point is you’re not disagreeing with me. You’re ---
A. I could take money out of the company, or my business.
Q. That’s right. So you are -- just to establish that -- I’m not putting words in your mouth. You’ve already said that you control this money. You can keep it in the -- in Prince Financial Consulting or take it out any time you want because it is after tax money. You’re not . . .
A. There’s no implications about taking money in and out. I have full control and I can do what I want with it.
Q. Well, the point I’m making is ---
A. I don’t dispute what you’re saying.
Q. Okay. I mean, if this was a corporation you wouldn’t be able just to take money in and out like that because there would be tax consequences. It’s not the same.
A. It depends if it’s set up as dividends or if it’s a loan to shareholder. That’s another issue.
Q. So would you agree that the capital investment does not reflect the worth of the business and so it’s not the fair market value of the business?
A. To be honest with you, Ms. Prince, I don’t understand what you’re saying. It’s simply capital net book value, assets over liabilities. It’s very simply, elementary accounting. I can’t put it any simpler than that.
[Emphasis added]
The “capital portion” so-called, is not a bank account and not an asset separate from the business. Either PFC was a matrimonial asset, or it was not. It is clear from the trial judge’s analysis that he considered the “capital portion” to be an asset distinct from the business itself. In this regard he asked himself: “What is the evidence adduced on which Mr. Prince can say that the 'capital portion' was held or used for the production of income or profit?” In answering that question the trial judge said:
The sum of money is simply an account Mr. Prince maintains and which he chooses to keep in his business accounts. Taxes have been paid on the sum. It is not an asset which generates income or a profit. Mortgages are assets which generate income for the business.
It was the evidence that Mr. Prince not uncommonly paid household bills from the business. Where he did so, however, the funds expended were characterized as a withdrawal by him for the purposes of calculating his taxable income. The fact that Mr. Prince could control the flow of funds from the sole proprietorship did not define its character as a business or matrimonial asset. PFC was a business owned by the husband prior to marriage. From that business he derived his income which he contributed to the support of the family. There was no evidence that Mr. Prince had withheld funds from the family or structured his affairs so as to preclude Ms. Prince sharing in this asset. In this respect the trial judge said: “That is not to say that Mr. Prince attempted to thwart the provisions of the Matrimonial Property Act or that this arrangement was made in any way to purposely divest Mrs. Prince from moneys to which she is entitled.” Any entitlement by Linda Prince to share in this asset turned solely upon the classification of PFC. It is clearly a business asset within the definition of the Matrimonial Property Act:
2(a) "business assets" means real or personal property primarily used or held for or in connection with a commercial, business, investment or other income or profit‑producing purpose, but does not include money in an account with a chartered bank, savings office, loan company, credit union, trust company or similar institution where the account is ordinarily used for shelter or transportation or for household, educational, recreational, social or athletic purposes.
The trial judge apparently concluded that the “capital portion” of the PFC fit within the latter part of this definition of “business asset” as money in an account used for matrimonial purposes. With respect, he erred. PFC is a business asset. The appellant shall succeed on this ground of appeal.
(ii) Disposition Costs on the Matrimonial Home:
The parties agreed, prior to trial, that the matrimonial home had a value of $174,000. At the 1996 hearing, the wife took the position that she would not have agreed to that value had she understood that it would be further reduced by notional real estate commission and legal fees on sale. The husband, who was in possession of the home and had no immediate plans to sell it, sought to have disposition costs deducted for valuation purposes. The judge declined to do so. In this regard he said:
[para28] There was no evidence tendered at trial in June, 1995 concerning the disposition costs. In the 1996 hearing Mrs. Prince said she would not have agreed on the figure of $174,000.00 if it was to be reduced by real estate fees and legal fees. She also suggested there would be no need for legal fees if the property was sold because Mr. Prince's father was a lawyer. The husband said there should be a 5 percent real estate fee and a legal fee deducted. He said in his business property has not been sold without real estate fees being paid.
[para29] Mrs. Prince's reliance on an agreement that the home had a value of $174,000.00 is troublesome. It would seem disposition costs should have been considered at the same time as the valuation and a net value should have been the subject of the agreement. Her statement that she would not have agreed on the value of the home if that agreed amount was to be reduced gives rise to a concern she made an agreement without understanding or appreciating the consequences. Yet there is not evidence to permit the Court to make a finding on this point and the merits of a disposition cost reduction must be considered.
[para30] The leading authority on the issue of disposition costs is Gomez‑Morales v. Gomez‑Morales (1990), 100 N.S.R. (2d) 137. The case involved the division of a business asset and Hallett, J.A. stated at p. 146:
If an award is likely to be made that cannot be satisfied out of matrimonial assets but will involve a division of business assets as in this case, then in determining the value of assets of the payor spouse, each asset and the circumstances of the payor spouse should be looked at to determine if the appraised or market value of the assets should be reduced to recognize the reality of disposition costs (legal fees and real estate agent's commissions for example on a sale of real property) and any tax costs associated with disposition of the asset.
If there is credible evidence that the capital property will be sold, in the event of a substantial award the tax and disposition costs can be calculated with accuracy and should be deducted from the value of the asset. If there is not any credible evidence on the issue, the court will have to consider the personal and financial circumstances of the payor spouse and the nature and history of the asset to determine if fairness demands there be a reduction in the value of the asset to recognize the contingent liabilities or expenses that relate to capital property such as disposition costs, capital gains tax and recapture of depreciation that would likely become a reality on the disposition now or in the future.
[para31] Before a Court can consider evidence on valuation of assets or deduction of expenses the Court must consider, on the balance of probabilities, the likelihood of the value or the expense. Disposition costs have been said by courts to be probable in the sale of matrimonial homes. In disposing of homes I agree that there normally will be a requirement for these expenses. But the Court must be satisfied on each occasion that the expenses are probable. In this case Mr. Prince is in the property business. He is continuously involved in the management of property and mortgages. I am not prepared to find that he would incur the same expenses on the sale of his property as would other homeowners and I will not deduct disposition costs from the agreed figure of $174,000.00 as the value of the matrimonial home.
Counsel for the appellant makes an able and persuasive argument that real estate commission and legal fees should routinely be deducted when valuing a matrimonial home. He submits that there should only be deviation from that rule in the rare case where there is evidence that the home is currently being sold without those expenses incurred. He asks that we clarify and refine the law in this regard. The general rule stated by Hallett, J.A. in Gomez-Morales, supra, he submits, while appropriate for other assets, should not be applied to the matrimonial home. The court should not consider whether the home will be eventually sold, but routinely deduct disposition costs of a sale as that is the only way to fairly reflect the realizable value of the home.
Here the judge properly instructed himself in the law. He addressed his mind to the issue. He made a factual finding that upon eventual sale, Mr. Prince, given his knowledge of the real estate field, would probably not incur disposition costs. The judge expressly recognized that normally disposition costs would be deducted. His decision did not turn upon whether the home would be sold, but whether, whenever sold, Mr. Prince would pay real estate commission and legal fees. There was some evidence before him to support his finding that Mr. Prince might not incur these costs. In this regard the trial judge made no reversible error.
(iii) Lump Sum Spousal Maintenance:
The trial judge awarded lump sum maintenance of $8,000. He said:
[para11] The wife seeks spousal support in the form of two lump sum payments. She says if she had retained her position at George Brown College she has "no doubt" she would have been appointed to the office of comptroller earning $70,000.00 a year and she seeks $20,000.00 for this "lost opportunity".
[para12] In addition she seeks $12,000.00 as a sum to compensate her for what is described as basic necessities from the time of separation until the first interim support order dated June 30, 1993. From January 1993 the husband only paid $500.00 a month for the support of the wife and child until the court ordered him to pay $2,000.00 a month. The wife maintains that from January to May she spent $12,000.00 in food, clothing, entertainment, the baby's requirements and other items.
[para13] In dealing with spousal support the court must consider s. 15 of the Divorce Act, 1985, and the principles enunciated by the Supreme Court of Canada in Moge v. Moge, [1992] 3 S.C.R. 813.
The judge found there to be no compensable loss as a result of the wife leaving her employment, however, he said:
[para16] On the other hand, I do find merit in the submission that compensation be awarded in a lump sum for the period between January 1993 to June 1993 on the basis of economic disadvantage as a result of the marriage breakdown. The evidence is that the wife encroached on her capital as a result of the inadequate payment of the husband for child support. He paid $500.00 a month during this period. I find the amount of $12,000.00 claimed by the wife to be excessive, but I do award $8,000.00. Reference is made to Mosher v. Mosher (N.S.C.A. March 27, 1995).
The husband submits that it is not appropriate to use a lump sum order to effect retroactive periodic maintenance. He further submits that the judge failed to take into account the fact that, while the husband was only providing funds of $500 per month during the period in question, the wife was occupying the mortgage-free matrimonial home with the husband paying associated expenses directly including heat, water, electricity, cable T.V., property taxes and insurance. These amounts, he submits, would total about $500 per month. In the result, the wife was effectively receiving maintenance of about $1,000 monthly, tax free. This, he says, is comparable to a taxable amount in the order of $2,000 per month. It is the husband’s position that the trial judge erred in basing the lump sum award on the assumption that the husband paid only $500 per month.
The husband further submits that, because the wife had a GIC valued at $100,000 at the time of separation, she should not have been considered “in need” of lump sum maintenance.
It is accepted law that "lump sum maintenance is really only justified if there is a specific or immediate need for it". (MacNeil v. MacNeil (1994), 129 N.S.R. (2d) 284 (C.A.) per Macdonald, J.A.) Here, there was evidence, accepted by the trial judge, that the wife had encroached on her capital “as a result of inadequate payment of child support by the husband”. She gave evidence as to how the funds had been spent. While Justice Davison thought the wife’s claim of $12,000 was excessive, he awarded the sum of $8,000. He accepted that the wife had spent that amount, bona fide, in attending to the needs of herself and the child. Although the support ordered by the trial judge for that period of separation apparently exceeded the periodic child support ultimately ordered, that of itself does not constitute error. The wife did not have employment income during this period. Her needs, then, were not limited to the support of the child, but to her own support as well. The pattern during the marriage, after Sarah’s birth, was that the husband’s income went to the support of the family. The wife was not expected to encroach upon capital for her own needs. Justice Davison’s order simply served to preserve that arrangement until the parties’ respective obligations were finally determined and pending the wife’s resumption of employment. There being no error, the appellant shall not succeed on this ground of appeal.
(iv) Quantum of Child Support:
In the 1995 decision the trial judge ordered ongoing child support of $2,100 per month, once the wife was maintaining separate premises. The wife was earning $56,500 annually. The evidence regarding the husband’s income was most confusing. The trial judge determined that in 1994 the husband’s income was $87,000 including the sum of $25,000 which represented depreciation on the book value of the buildings owned by PFC. The husband had acknowledged in his evidence that the figure for depreciation did not represent funds actually out of pocket and that he had the use of that cash in addition to his income. The judge found, therefore, that the joint family income was $143,500 and that the child should have a commensurate standard of living. The wife submitted a detailed budget for herself and the child. The judge determined that expenses attributable to the child totalled $2,200 monthly. This was consistent with the evidence of the wife. It included a proportion of the basic shelter expenses to which was added those expenses solely attributable to the child. The judge fixed the husband’s share at 2/3 of that amount. After tax considerations, the judge arrived at the figure of $2,100 monthly child support. It is the appellant’s submission that the quantum is far too high for one child.
Counsel for the appellant submits that the trial judge erred in attributing income to the husband. In particular, he submits that it was an error for the trial judge to count, as income, the depreciation claimed in relation to the rental properties. He urges us to accept that the husband’s income is $55,000 per annum. The difficulty facing the trial judge here, however, was that the evidence concerning the husband’s income was unclear. There was evidence that the husband had some discretion in the fixing of his income insofar as his withdrawal of funds from PFC was, to a degree, discretionary. At least on occasion he was able to minimize his taxes through the use of bonuses from his father's company. It was fair to infer that his effective income was in fact higher than the sum which he reported to Revenue Canada in view of his ability to minimize income tax. In this regard I do not suggest any impropriety. There is an obligation upon litigants in a matrimonial proceeding to present the financial evidence in a clear and understandable manner. In fixing the husband’s income at $87,000, for the purpose of calculating child support, I cannot say that the judge committed a palpable and overriding error. Indeed, the husband testified that he had an annual “income” of between $70,000 and $74,000 and that he could afford to pay child support in the range of $2,000 per month. It was unclear whether the income figure conceded by the husband was gross or net of tax. The judge did the best he could with the evidence before him.
The husband submits, as well, that the trial judge did not give sufficient consideration, in fixing the quantum of child support, to the considerable cost to the husband of exercising access. The husband acknowledged in his evidence, however, that notwithstanding a substantial award of child support, he could afford to exercise access.
In arriving at the child support, the trial judge was guided by the decision of the Alberta Court of Appeal in Levesque v. Levesque (1994), 4 R.F.L. (4th) 375, which decision he noted was referred to by this Court in Edwards v. Edwards, supra. The quantum of child support must be assessed in the context of the income of the parties. The words of Chipman, J.A. in Edwards at p.15 are instructive:
[para30] This issue breaks down to a review of the trial judge's assessment of the cost of the children’s support and the ability of the mother and the father to bear their share of that cost.
[para31] The trial judge's finding was that the mother's cost of supporting the children was approximately $2,000 per month. The father challenges this, arguing that instead of assessing the evidence, the trial judge blindly accepted the mother's statement as to the cost of the children. With respect, I do not agree. The mother gave extensive evidence respecting the costs of maintenance of the children. It is to be kept in mind that these children were the children of an up‑and‑coming professional man and his wife. . . .
[para32] While the cost of supporting these children may seem high, this must be judged in the context of the lifestyle of the parents and the fact that, between them, they now have comfortable disposable incomes. The trial judge made specific reference to the fact that the mother was building up a fund for their higher education and that it was being properly managed. It has been said time and again that the child's right to support is paramount. Frequently courts are limited in what they can do by the inability of the parents to pay a fit sum for the support of their children. That is not the case here.
[para33] In response to those who complain of inconsistency in support awards it must be kept in mind that the task of fixing support under s. 17(8) is a very individual exercise, tailored to the circumstances of the family under consideration. A study of other awards for comparative purposes is an exercise of limited value. The child's needs and the parents' abilities range over a very wide economic scale. Here, for instance, we are not concerned with just the bare cost of food, clothing and minimal shelter for a child . . .
In regard to the principles to apply in fixing child support, Chipman, J.A. expressly approved the general guidance provided in Levesque, supra. He said at p. 21:
[para56] In particular, the Alberta Court of Appeal's observations on the following points are fitting here: (1) the prime obligation of both parents to support their children; (2) that parents, not the children, should absorb the increased costs resulting from the divorce and separation; (3) that the selection of an appropriate amount of support is a matter of judgment upon the application of the relevant principles to the evidence; (4) the calculation of the combined annual gross income of the parties is the starting point; (5) the emphasis must be on income earning capacity, not merely earned income; (6) the goal for the children should be a standard of living commensurate with the incomes of the parents, regard in the first instance being to the standard of living chosen for the children by the parents when they lived together; (7) access parents are not to receive concessions that compete with or challenge the role of the custodial parent; (8) after calculation of the combined gross income and reasonable child care costs, the court apportions the responsibility of each parent; (9) the dramatic impact of taxation in cases of middle income earners plays a significant role. However, the laws of taxation do not necessarily apply in assessing the ability to pay support.
In fixing the support award, Justice Davison considered the Levesque guideline that parents should share child care costs in proportion to income. He determined, however, that such a calculation “overlooks the hidden expenses which materialize for the custodial parent”. He determined that the husband should bear 2/3 of the child care costs. The figure resulting was grossed up for tax purposes. (In doing this calculation there was a mathematical error which results in the husband paying a lesser amount than if the gross up had been properly calculated. The respondent has not asked that this error be corrected.)
In my view, the trial judge committed no reversible error in estimating the husband’s income. While the adding back of depreciation is questionable, the gross income figure reached by the trial judge, taking into account the husband’s ability to control his withdrawals and to minimize income taxes, is within the range according to the evidence. Nor did he err in assessing the amount of child care costs and the proportionate share of each parent. His approach and resulting award is consistent with the general principles approved by this Court.
The appellant submits that the child support award is inappropriately high when compared to that which would be ordered under the Child Support Guidelines. The Child Support Guidelines had not come into effect when this award was made. It would be inappropriate for this Court to assess the child support in comparison to the Guidelines, since those Guidelines were not considered by the trial judge.
(v) Insurance Policy:
At the time of trial, the husband maintained a life insurance policy in the amount of $250,000 naming his father as trustee for the benefit of the child. The judge ordered that the mother replace the grandfather as trustee for the child and that the husband continue to maintain the policy until support is no longer payable for the child.
The appellant submits that as this issue was not raised at the 1995 hearing it should not have been re-opened by the judge. At that first hearing the wife was represented by Ontario counsel. In subsequent correspondence he advised the judge that the change to the life insurance coverage is routinely dealt with in the Ontario courts. He asked that the judge make a determination. It was within the trial judge’s discretion to accede to that request. In so doing he did not err. The resulting order was a reasonable one, consistent with the child’s best interests and served to secure the maintenance in the event of the husband’s death.
(vi) The R.R.S.P. Classification (Cross-Appeal):
The trial judge found that an RRSP purchased by the husband just shortly after the separation date was not a matrimonial asset and exempt from division. In this regard the trial judge said:
[para20] There was considerable evidence about an RRSP in the amount of $12,500.00 and whether that RRSP could be considered a matrimonial asset. From the evidence I find that it was acquired after separation and it is not a matrimonial asset.
It had been conceded by the wife and her counsel, at the first hearing, that the RRSP was not a matrimonial asset. The cheque for the investment was drawn on the husband’s business bank account on January 6, 1993. The parties separation date was found to be January 10, 1993. On January 12, 1993 the paperwork for the RRSP was completed and the RRSP came into existence. It was open to the trial judge to conclude that it was not a matrimonial asset. Most importantly, however, the funds for the RRSP were borrowed. It had no net value. There is no merit to this ground of appeal.
(vii) Extraordinary Expenses Relating to the Child (Cross-Appeal):
The trial judge declined to order that the husband be responsible for “extraordinary expenses”. In this regard he said:
[para16] A request is made for the husband to be liable for any extraordinary expenses incurred by the child. In his testimony the husband agreed he would come to the assistance of the child in circumstances which could be considered extraordinary. The difficulty is attempting to define this requirement in the judgment. There is remedy at law for the wife to seek a variation if there is a change in the needs of the child. Inclusion of the clause suggested by the wife could affect a position with respect to the financial support for the child in that it could serve to either increase or decrease the support in an unnecessary fashion. The argument of what is "extraordinary" appears inevitable. I do not intend to change the form of describing child support. Nevertheless, from his evidence, I believe the father recognizes his responsibilities to be of assistance to the child to an extent, on some occasions, in excess of the support payments set out in the Court's decision.
This was a matter within the discretion of the trial judge. He provided for a generous amount of child support and accepted the husband’s assurances that he would provide additional assistance to the extent that he was able. He did not err.
DISPOSITION:
The husband shall succeed on the first ground of appeal. The Corollary Relief Judgment shall be amended to provide that the wife shall not be entitled to a share of Prince Financial Consulting, and in particular, shall not be entitled to a half interest in the “capital account” of $69,509.
In all other respects the appeal and cross-appeal are dismissed.
COSTS:
While there has been divided success in this matter, the substantial issue before us was the treatment of the “capital account”. In recognition of the husband’s success on that issue, he shall have costs in the reduced amount of $1,000 plus disbursements.
Bateman, J.A.
Concurred in:
Clarke, C.J.N.S.
Roscoe, J.A.
C.A. No.131737
NOVA SCOTIA COURT OF APPEAL
BETWEEN:
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SEYMOUR PRINCE )
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Appellant )
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) REASONS FOR
LINDA MARILYN PRINCE ) JUDGMENT BY: ) BATEMAN, J.A.
Respondent )
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