Rathee v. Rathee

Rathee v. Rathee Collection Decisions of the Court of Appeal Date 2024-12-18 Neutral citation 2024 ONCA 912 Docket numbers COA-24-CV-0554 Judges MacPherson, James C.; Roberts, Lois B.; Wilson, Darla A. Subject Family Decision Content COURT OF APPEAL FOR ONTARIO CITATION: Rathee v. Rathee, 2024 ONCA 912 DATE: 20241218 DOCKET: COA-24-CV-0554 MacPherson, Roberts and Wilson JJ.A. BETWEEN Noelle Heen-Lune Rathee Applicant (Respondent) and Rajinder Singh Rathee Respondent (Appellant) Ilana Zylberman Dembo, Courtney Palmer and Batya Berman, for the appellant Lorne Wolfson, for the respondent Heard: November 25, 2024 On appeal from the orders of Justice R. Lee Akazaki of the Superior Court of Justice, dated December 12, 2023 and March 7, 2024 with reasons reported at 2023 ONSC 5573 and 2024 ONSC 1419, and from the costs order dated December 20, 2023, allowing an appeal from a decision of Arbitrator Stephen Grant, dated August 20, 2022 and January 17, 2023. MacPherson J.A.: A. Introduction [1] The parties were married for seven years. There is one child of the marriage who was five years old when her parents separated. After the separation, the wife and child remained in the matrimonial home for about eight and a half years. Throughout these years, the husband provided substantial support to the wife and child. [2] In 2019, the parties decided to place their remaining financial issues before an arbitrator. On the issue of spousal support, the arbitrator ordered the husband to pay the wife a lump sum of $250,000. [3] The wife appealed this component of the arbitration award. She sought an award of $1,000,000. [4] The appeal judge of the Superior Court of Justice allowed the appeal and ordered the husband to make a lump sum payment of $1,893,603 to the wife. [5] The husband appeals this decision. B. Facts (a) The parties and events [6] The appellant Dr. Rajinder Rathee is an ophthalmologist. He has his own private practice and operating privileges at three Toronto area hospitals. [7] The respondent Noelle Rathee is a salaried pharmaceutical representative with Valeo Pharma, a Montreal based company. She is responsible for eastern Ontario. Earlier in her career, she worked for GlaxoSmithKline, another large pharmaceutical company. During the marriage, she left the workforce to care for the parties’ child. [8] The parties married in August 2006. They separated in 2013, in July according to Ms. Rathee or in October according to Dr. Rathee. Accordingly, the marriage lasted about seven years. [9] There is one child of the marriage, a daughter who was born in 2008 and is now a student in Grade 11. [10] For several years after their separation, the parties mutually worked out their financial situation. Ms. Rathee and the child continued to live in the family home and Dr. Rathee provided financial support to them. The family took some holidays together and there appears to have been some shared hope of reconciliation. [11] Eventually, the separation became permanent and the parties decided to resolve their financial situation. They attended a five-day arbitration in April and May 2022. (b) The arbitration [12] The arbitrator was Stephen Grant, a very experienced and respected family lawyer. [13] The arbitrator determined that the parties’ incomes from 2013 to 2021 were: Husband’s Income Wife’s Income 2013 $1,552,000 $86,209 2014 $1,248,000 $119,532 2015 $1,089,000 $147,965 2016 $1,075,000 $168,921 2017 $1,207,000 $171,186 2018 $1,189,000 $173,983 2019 $1,363,000 $175,346 2020 $701,000 $126,646 2021 $2,360,000 $136,817 [14] In his award, the arbitrator dealt with many issues, including prospective and retroactive spousal support, child support and equalization. [15] On the issue of retroactive spousal support, the arbitrator concluded: In consideration of all the objectives and factors of a spousal support award, including the parties’ means, needs and financial circumstances, I find that a lump sum payment of $250,000 will fully compensate Ms. Rathee for any disadvantage arising from the marriage and marriage breakdown and the roles and responsibilities assumed during the marriage, especially considering its relatively short duration and the delay in pursuing her claims. [16] In a subsequent award, the arbitrator awarded Dr. Rathee costs of $171,330. He concluded: As a result, I am awarding Dr. Rathee costs, all‑inclusive, of $171,330 (a $35,000 reduction) which I find to be a fair reflection of the parties’ reasonable expectations, their positions taken in this proceeding, their settlement offers, and the results achieved. (c) The appeal [17] The wife appealed the spousal support award. The appeal judge allowed the appeal and ordered the husband to pay $1,893,603 for spousal support plus pre‑judgment interest of $168,057 and post‑judgment interest of three percent per annum from August 20, 2022. The appeal judge also set aside the arbitral costs award in favour of the husband and awarded the wife costs of the arbitration fixed at $276,591 plus post-judgment interest of four percent per annum from January 17, 2023. He also awarded costs of the appeal to the wife fixed at $29,000. [18] The core reason advanced by the appeal judge for overturning the arbitral award was that the arbitrator did not pay proper attention to, and apply, the Spousal Support Advisory Guidelines (“SSAGs”)[1] developed by the federal Department of Justice and widely used throughout the family law community, including by lawyers and judges. As expressed by the appeal judge: “[the arbitrator] thus did not perform the foundational task, either to establish the range, or to give reasons why the range was inappropriate.” [19] The appeal judge performed his own analysis using the SSAGs and concluded: Calculated over the period between separation and the arbitration, it should have been obvious that a rather orthodox SSAGs calculation, based on the with‑child‑support formula, should have produced lump sums at least ten times more than the $250,000 awarded. [20] After doing some other calculations and taking into account the positions and submissions of the parties, the appeal judge settled on an award of $1,893,603 in favour of the wife. C. Issues [21] The appellant advances eight grounds of appeal relating to the appeal judge’s decision. At the hearing, the appellant focused on the submission that the appeal judge failed to give deference to the arbitrator’s findings and failed to apply the law of spousal support, including the application of the SSAGs, to the facts. D. Analysis (1) The appeal judge’s decision [22] In a leading family law arbitration case, Petersoo v. Petersoo, 2019 ONCA 624, Benotto J.A. said, at paras. 35 and 36: Mediation/arbitration is an important method by which family law litigants resolve their disputes. Indeed, the courts encourage parties to attempt to resolve issues cooperatively and to determine the resolution method most appropriate to their family. The mediation/arbitration process can be more informal, efficient, faster and less adversarial than judicial proceedings. … The essence of arbitration is that the parties decide on the best procedure for their family. Although the family law of Ontario must be applied, the procedures on an arbitration are not meant to mirror those of the court. [23] In his reasons, the appeal judge paid no heed to this important description of the family law arbitration regime and its obvious cautionary message to judges. Instead, the appeal judge spoke in terms of an absence of factual findings, fatal legal error, another non sequitur, and unreasonable result. None of these terms, and the inevitable legal result flowing from their use, was warranted. [24] The overarching problem with the appeal judge’s reasons is that he ignored the clear direction of the SSAGs, as highlighted by this court in Halliwell v. Halliwell, 2017 ONCA 349, at para. 115, that support entitlement considerations inform the proper application of the SSAGs formula. In assessing the wife’s spousal support entitlement, he ignored that the wife entered the marriage with a net worth of approximately $95,000 and left it with a net worth of over $3.5 million. He also gave no credit for the eight and a half years of rent-free occupation of the jointly-owned matrimonial home that the husband provided the wife post-separation but before the parties resorted to arbitration and, ultimately, the courts. [25] The arbitrator described the parties’ post-separation and pre-arbitration financial situation in this fashion: Ms. Rathee says she was always focused on [the child’s] well-being and while she raised financial concerns from time to time, they were not foremost in her mind. She testified (and I accept this evidence) that in addition to his maintaining the financial status quo, Dr. Rathee assured her that the financial settling-up would be dealt with as part of the legal process, once the dust from their separation settled. … Although apparently “conflict-avoidant”, Ms. Rathee sought and received from Dr. Rathee any additional funds she required from time to time, such as for the property taxes, in addition to the salary she received from Dr. Rathee’s professional corporation. This is summarized (to date) in Mr. Pont’s two income reports. This situation prevailed through the next few years as Ms. Rathee was preoccupied with caring for her ill father who died in July 2017. In short, not only was there no request by Ms. Rathee for a formal financial arrangement made during this time but there was none actually made until 2017. Up to this point, Dr. Rathee relied on Mr. Wolfson’s request made in a letter to Ms. Zylberman Dembo of July 16, 2013, asking that Dr. Rathee maintain the financial status quo which he agreed to do and appears to have done. While Ms. Rathee says she “paid” certain household bills, child-related expenses and so on, it’s clear to me that the source of most, if not all, of these funds, even ultimately from her own savings, was Dr. Rathee. I note in passing that Ms. Rathee did not obtain further remunerative employment until June 2019. [26] In his analysis of retroactive and prospective spousal support, the arbitrator specifically found at para. 150 that the husband “understood he was fulfilling his support obligations by maintaining the financial status quo.” This included payment of the housekeeper and the wife’s rent-free occupation of the jointly-owned matrimonial home. For while the arbitrator dismissed the husband’s claim for occupation rent, in so doing he explained that the husband “conduced to Ms. Rathee’s remaining in the home as part of maintaining the status quo on separation”: para. 45. Read as a whole, it is clear that while unwilling to monetize the amount, the arbitrator clearly attributed towards spousal support the undeniable benefit to the wife in living rent-free in the jointly-owned matrimonial home. [27] The appeal judge did not consider any of these relevant factors. Instead, he described the husband’s contributions as “zero payment of spousal support”. This was a fundamental error that affected his entire analysis. Accordingly, I would allow the appeal and set aside the appeal judge’s decision. (2) The arbitrator’s decision [28] The normal result in a case where this court allows an appeal and sets aside a judicial decision that overturns an arbitrator’s award is reinstatement of the arbitrator’s decision. That is the result the appellant husband seeks in this case – an order reinstating the arbitrator’s $250,000 spousal support order in favour of the wife. [29] I am not prepared to accept this submission and result. Unfortunately, there is, in an otherwise excellent award, a fundamental error in the arbitrator’s reasoning which must lead to a different final result. [30] The arbitrator’s reasoning and conclusion on the spousal support issue were: In these circumstances, I find that a lump sum amount of spousal support will fulfill the objectives of the Divorce Act and satisfy Ms. Rathee’s retroactive and prospective entitlement, to both compensatory and non-compensatory support. … In consideration of all the objectives and factors of a spousal support award, including the parties’ means, needs and financial circumstances, I find that a lump sum payment of $250,000 will fully compensate Ms. Rathee for any disadvantage arising from the marriage and marriage breakdown and the roles and responsibilities assumed during the marriage, especially considering its relatively short duration and the delay in pursuing her claims. [31] Unfortunately, in arriving at the figure of $250,000, the arbitrator neither applied, nor explained his departure from, the SSAGs. [32] In McKinnon v. McKinnon, 2018 ONCA 596, van Rensburg J.A. stated at para. 24: The SSAGs are the presumptive starting point for awarding support. Any departure from them requires adequate explanation: Slongo v. Slongo, 2017 ONCA 272 at paras. 105 and 106. [33] In Slongo v. Slongo, 2017 ONCA 272, Simmons J.A. explained the rationale for this requirement, at para. 105: “without [the SSAGs], it is very difficult to establish a principled basis for arriving at a figure for spousal support.” [34] For a seven-year marriage, the SSAGs suggest a spousal support range of 3.5-13 years. Here, the arbitrator stated at para. 120 of his decision that after eight and a half years, the wife’s spousal support entitlement was “at or near the end”. This duration of approximately eight and a half years falls within the range recommended in the SSAGs. [35] However, the amount of $250,000 bears no relation to the recommended amount in the SSAGs. Under the SSAGs, above the $350,000 income “ceiling”, an additional formula range is created: appropriate income inputs range anywhere from $350,000 to the full income amount: see Halliwell at para. 116. Even at the very bottom end of this range, the husband’s spousal support obligation was $114,000 per year. Over the eight and a half years prior to arbitration, the husband should have paid a minimum of $969,000 in pre-tax spousal support. [36] The arbitrator found at para. 129 that the husband’s direct payments to the wife did not extend beyond his child support obligations. He did credit the husband, however, with fulfilling his spousal support obligation to a certain extent by “maintaining the financial status quo”: para. 150. However, in my view, this non‑monetized benefit of living rent-free in the matrimonial home is minimal compared to the range of spousal support recommended in the SSAGs. [37] The spousal support award of $250,000 therefore departs significantly, and without explanation, from the range recommended in the SSAGs. [38] Also, while the arbitrator found that the wife could have brought her claim sooner, he also found at para. 128 of his decision that the husband was, “either aware or ought to have been that he would owe not only an equalization payment of some significance but also child and spousal support. Not having made payment(s), it enabled him to amass capital and enjoy his income free from constraint.” At para. 152 the arbitrator stated that, “[i]n considering the cases of S. (D.B.) v G. (S.R.), Kerr v. Baranow and others, I find the reasons for Ms. Rathee’s delay relatively explicable, especially in the later years, and not affecting her entitlement to spousal support, as opposed [to] fixing an amount that appropriately and equitably balances the countervailing interests of the parties.” This is effectively a finding that the husband had notice of his spousal support obligation from the start. On his own findings, the arbitrator should have awarded the wife at least five years of retroactive support. [39] In short, nothing in the arbitrator’s reasons explains the chasm between the amount actually paid by the husband towards support and this baseline obligation under the SSAGs. [40] For this reason, the arbitral decision cannot stand. (3) An appropriate award [41] Having found reversible error in both the appeal judge’s and arbitrator’s approaches to spousal support, the parties ask that this court substitute its own award. This was the approach in Halliwell v. Halliwell, 2017 ONCA 349. [42] As stated in Halliwell at para. 108, “[t]he application of the SSAGs formulas, whether under or above the ceiling, requires a preliminary consideration of entitlement. The entitlement question then informs the approach to be taken in applying the SSAGs.” [43] Here, the arbitrator’s findings of fact remain intact. The wife was entitled to spousal support on both compensatory and non-compensatory grounds. The compensatory entitlement was significant here. The wife was the primary caregiver for the young child both during the marriage and after. While both parties entered the marriage with a high level of education – the husband with his medical degree and the wife an MBA – the wife left the workforce to manage the household and care for the child. [44] There is far less of a non-compensatory basis for spousal support in this case. By the time of arbitration, the wife was making a good salary as a pharmaceutical representative. She also left the marriage with assets worth $2,400,000. Assets acquired during marriage and/or as a result of equalization properly affect entitlement and the appropriate choice of income input above $350,000: see Halliwell, at para. 116. [45] In all the circumstances of this case, I would select an income input for the husband of $600,000. This is above the SSAGs “ceiling” of $350,000, but well below his total average income of $1,253,000 as found by the arbitrator at para. 131. Where child support is awarded on very high payor income and goes well beyond a young child’s needs, it is appropriate to consider the practical benefit to the recipient spouse.[2] This effect was amplified here where the wife was able to remain in the jointly-owned matrimonial home for eight and a half years while the husband derived no benefit from his half of that asset. He also did not deny the wife any additional payments she requested over this time. [46] Using a payor income input of $600,000 yields an annual mid-point spousal support award of $193,968 per year. As already explained above, I would grant this award for five years retroactively, amounting to a total pre-tax award of $969,840. Treating this as a lump-sum award that will be neither tax-deductible for the husband nor taxable for the wife, I would net this amount down by 30%[3] to $678,888. [47] I would therefore award the wife a lump-sum after-tax amount of $678,888 in spousal support. Disposition [48] The appeal is allowed. The appeal judge’s decision is set aside in its entirety. Both costs awards of $29,000 on the appeal and $7,000 on the subsequent motion are also set aside. The parties will bear their owns costs of that appeal. The arbitrator’s award is reinstated except for the amount of spousal support which is increased from $250,000 to $678,888. [49] The arbitrator’s costs award is also set aside. Under Rule 24(1) of the Family Law Rules, O. Reg. 114/99, a successful party is presumed to be entitled to costs. Rule 24(6) provides that where success is divided, the court may apportion costs as appropriate. Success was divided at the arbitration but the arbitrator found that overall, the husband was the more successful party on the main issues of equalization and spousal support. Given my finding about the appropriate quantum of spousal support, this conclusion is no longer true. The wife is now the more successful party on the issue of spousal support and the award of $678,888 exceeds the husband’s offer to settle of $425,000. On the issue of equalization, the award of $682,382.43 slightly exceeds the husband’s offer of $676,218. Therefore, on balance, the wife was the more successful party. I would set aside the arbitrator’s costs award and award $100,000 all-inclusive to the wife. This quantum is lower than her partial indemnity costs of $276,591.45 but it appropriately reflects the divided success at arbitration. [50] At the hearing, counsel for both parties asked for the opportunity to make written submissions on the costs of the appeal if this court chose not to uphold either the arbitrator’s or the appeal judge’s quantum of spousal support. Both parties will have three weeks from the release of this decision to submit written costs submissions not exceeding three pages. Released: December 18, 2024 “J.C.M.” “J.C. MacPherson J.A.” “I agree. L.B. Roberts J.A.” “I agree. D.A. Wilson J.A.” [1] Ottawa: Department of Justice, 2008. [2] See the discussion of financial synergy that benefits the recipient spouse in Gray v. Gray, 2014 ONCA 659, at para. 30. [3] This represents the tax benefit to the wife of receiving this money tax-free. The husband’s tax deduction benefit would have been greater, but this is a fair result given his delay in meeting his obligations.