This case addresses the following issues and considers potential basis for appealing a trial court decision with respect to each issue:
- In what circumstances can a court award sole custody?
- Does a court have the discretion to order child support in an amount which was determined based on past income?
- Can a gift or bequest under s. 4(2), paragraph 1 of the Family Law Act be excluded from Net Family Property if it was deposited into a bank account held in the joint names of both parties?
- When does the refusal of a successful party’s Offer to Settle entitle the successful party to costs on a full recovery basis?
Background
The Appellant mother and Respondent father were involved in a dispute over custody and access of their children, child support, and equalization of family property.
The Respondent made an Offer to Settle the matter in August of 2013, which remained open for acceptance until three days prior to the commencement of trial. The Appellant did not accept said Offer and the dispute proceeded to trial in October of 2013.
The trial judge handed down her decision, dated September 15, 2014, which included the following points on which the Appellant Appealed the decision:
- The Respondent was granted sole custody with a shared parenting arrangement wherein the Respondent would have the children more than 40% of the time;
- Child support was ordered based on the parties shared parenting arrangement and the Respondent’s 2012 income;
- Some of the Respondent’s assets were excluded from the calculation of net family property and equalization on the basis that he received the assets as testamentary bequests from his mother and inter vivos payments from his mother’s estate; and
- Costs were awarded to the Respondent on a full recovery basis in the amount of $95,498.39.
The Appeal Decision
The appeal was dismissed on all issues other than costs. The court granted leave to appeal on costs and varied the costs order to $76,000.00 for trial. The court also awarded a further $17,500.00 to the Respondent for the appeal.
Reasons for Decision
The Appellant appealed on the basis that the trial judge erred in her decision on the above-mentioned issues.
The Appeal Court found there was no palpable and overriding error in the trial judge’s decision on the substantive issues. The reasoning of the Appeal Court is set out below.
Custody
The trial judge did not err in granting sole custody to the Respondent because her decision was supported by the evidence of the Appellant’s conduct with respect to the children. The evidence supported a conclusion that a shared custody arrangement would not likely work in this case.
Additionally, the trial judge was careful to ensure shared parenting time such that both parents would have meaningful input into how important decisions would be made.
Child Support
The trial judge did not err in basing the child support Order on the Respondent’s 2012 income given that the trial occurred in October of 2013.
The trial judge took into consideration the shared parenting arrangement wherein the Respondent had the children for more than 40% of the time. Child support determination in this type of shared parenting arrangement is a matter of judicial discretion as there is no fixed formula to calculate same. As such, the trial judge’s decision in this respect is owed deference.
Additionally, the Respondent’s income only increased from $109,000 in 2012 to $118,000 in 2013. The difference in child support would be insignificant in the context of this case and the parties have the ability to vary the Order in the event of a substantial change in circumstances should one arise in future.
Exclusion of Assets from Equalization of Net Family Property
The trial judge did not err in fact or in law by allowing the Respondent to exclude $122,762.00 held in his investment account from the calculation of his net family property pursuant to s. 4(2), paragraph 1 of the Family Law Act.
Section 4(2), paragraph 1 of the Family Law Act reads as follows:
The value of the following property that a spouse owns on the valuation date does not form part of the spouse’s net family property:
1. Property, other than a matrimonial home, that was acquired by gift or inheritance from a third person after the date of the marriage.
For the following reasons, the Appellant argued that the trial judge erred by allowing the Respondent to exclude funds from his net family property calculation on the basis that the funds were gifts and inheritance from his mother:
- The Appellant argued that the funds were intended as a gift to both parties; and
- The Appellant argued that the exclusion did not apply because the funds lost their status when they were deposited into a joint bank account held in both parties’ names before being transferred to the investment account in only the Respondent’s name.
The trial judge’s finding that the Respondent’s mother intended to give the gift and inheritance to the Respondent only was properly supported by the evidence.
Additionally, the trial judge properly found that the gifts and inheritance could be excluded based on the evidence that the Respondent’s mother expressed in her will that the funds and income earned off of same would be excluded from community property.
Finally, the funds did not lose their status as excluded property when they were first deposited into a joint account before being transferred to the Respondent’s investment account. Pursuant to section 14 of the Family Law Act, the fact that property is held in a joint account is presumed to be proof that the parties intended the property to be held as joint tenants unless the evidence proves otherwise. However, the trial judge found that there was sufficient evidence to rebut the presumption based on the fact that the Respondent transferred the funds to his investment account and the funds remained there for five years before separation.
Further, section 4(2), paragraph 5 of the Family Law Act states that the following is also excluded:
- Property, other than a matrimonial home, into which property referred to in paragraphs 1 to 4 can be traced.
Given that the Appellant conceded that the funds could be traced to the inheritance and gifts from the Respondent’s mother, the trial judge did not err by allowing the funds to be excluded.
Costs
The trial judge erred in awarding costs on a full recovery basis to the Respondent based on finding that the Respondent had made an Offer to Settle which remained open for acceptance until the start of trial.
Pursuant to rule 18(16) of the Family Law Rules, there may be costs consequences of failing to accept an Offer to Settle if the Offer presented terms that were the equal to or better than those ordered by the court. In order for the costs consequences to arise, the Offer must remain open for acceptance until the start of trial.
The Respondent’s Offer remained open until 3 days before the start of trial, however, the trial judge mistakenly found that the Offer remained open until the start of trial. As such, the costs consequences set out in section 18(16) do not apply and the Respondent was only entitled to costs on a partial recovery basis rather than on a full recovery basis.
Accordingly, the Appeal Court varied the costs award to award the Respondent costs in the amount of $76,000.00 rather than the $95,498.39 awarded by the trial judge. This amount was determined based on considering what was reasonable in light of the length of the trial, conduct of the parties, and the finding that the Respondent’s counsel’s rates and time spent were reasonable.