Smith v Alayo, 2016 ABQB 168

Court of Queen ’ s Bench of Alberta Citation: Smith v Alayo, 2016 ABQB 168 Date: 20160321 Docket: 4803 138687 Registry: Edmonton Between: Alan Winston Smith Applicant - and - Irene Gonzlez Alayo Respondent _______________________________________________________ Reasons for Judgment of W. S. Schlosser , Master in Chambers _______________________________________________________ Facts [ 1 ] This is a Default Hearing pursuant to

section 28 of the Maintenance Enforcement Act, RSA 2000, c. M-1. There are significant arrears after a series of Interim Orders

[2] The background facts are set out in the applicant’s brief in parallel proceedings. Mr. Smith is applying to have his ongoingsupport obligations terminated retroactively. These background facts are as follows: i. Mr. Smith and Ms. Alayo were married in Cuba on March 29, 2001. Mr. Smith states that he did not at anytime cohabit or have sexual relations with Ms. Alayo; the purpose of the marriage was solely to allow Ms. Alayo to immigrate to Canada. ii. Mr. Smith signed a Citizenship and Immigration Canada Sponsorship Agreement in October of 2001. ThisAgreement expired 10 years from the date Ms.

Alayo received permanent residence status. Ms. Alayo states on page 59 from her cross-examination that she received her landed immigrant status in October of 2003. iii. Ms. Alayo came to Canada in October of 2003 and stayed until February of 2004. Ms. Alayo alleges that theparties cohabitated and had a relationship during this time. Mr. Smith maintains that the parties did not cohabitate. iv. On October 14, 2010, Justice D.C. Read ordered Mr. Smith to pay $1,500 per month in spousal supportcommencing November 1, 2010 and continuing until April 1, 2011, subject to Ms.

Alayo's right to apply to have this support continued.It was also ordered for Mr. Smith to pay $10,000 in interim costs, plus $1,000 in costs for the application plus disbursements. v. On March 29, 2011, Justice B.R. Burrows ordered Mr. Smith to continue paying support in the amount of$1,500 per month from April 1, 2011 to December 1, 2011, subject to Ms. Alayo's right to apply to have this support continued. vi. On November 21, 2011, Justice J.H. Goss ordered Mr. Smith to continue to pay $1,500 in spousal support onthe first day of each month from December 1, 2011 onwards until further order of the Court.

Justice J .H. Goss also ordered that the issueof continuation of the payment of spousal support shall be returned to a Special Chambers date to be fixed by counsel. vii. In January of 2014 Mr. Smith was subject to a default hearing. This process has continued until August of2015 at which point counsel for Mr. Smith, Ms. Alayo, and the Director of Maintenance Enforcement made written submissions. viii. Mr. Smith has been paying $2,000 per month through Maintenance Enforcement ("MEP") pursuant to thevarious orders made by this Court since January of 2015. As of June 23, 2015, Mr. Smith has paid $30,399.79 to Ms.

Alayo and was$67,767.38 in arrears. Mr. Smith has also paid $2,000 to MEP in each of July, August, and September of 2015. ix. The parties have now been separated for at least 11 years are still not divorced. [3] In those proceedings Mr. Smith’s counsel argued that Ms. Alayo was no longer entitled to non-compensatory support,contractual support and that she had already been provided with adequate compensatory support. Justice Simpson agreed, at least on aninterim basis, until the matter could go to trial. The learned Justice also found that the status quo should be maintained, with Mr.

Smithpaying $2,000 per month toward the spousal support arrears. He also directed that his Interim Order should not affect the ongoingMaintenance Enforcement proceedings. [4] There are three issues: 1. The onus and the presumption set out in section 28(2) of the Act; 2. The appropriate procedure to be followed for the Maintenance Enforcement hearing; 3. What amount should be ordered in the circumstances of this case, and whether there should be imputed income. List of Authorities 1. Kamitomo v. Pasula, (1983) (AB KB), 29 Alta. L.R. (2d) 375, per Kryczka, J; 2. Rarick v Rarick, 2000 ABQB 284, per Veit, J; 3.

Grant v Wolansky, (1994) (AB KB), 154 AR 234, per Côté, J (sitting in Queen’s Bench); 4. Hartley v Del Pero, 2010 ABCA 181; 5. Hunt v Smolis-Hunt, 2001, ABCA 229; 6. Frank v Beaver, 2016 ABCA 35. 7. Marcer v Marcer, 2004 ABQB 551; 8. Longstaff v Longstaff, (1993) (BC CA), 49 RFL (3d)1 [5]

Section 28 of the Maintenance Enforcement Act is as follows: Default hearing 28(1) At a default hearing the Court shall inquire into

a) the resources of the debtor,

b) the debtor's means and ability to comply with the maintenance order,

c) the disposal the debtor has made of any property since the maintenance order was made,

d) any and all debts that are owing to the debtor or by the debtor,

e) the circumstances under which the debtor defaulted in paying under the maintenance order, and

f) any other matter the Court considers relevant, and for that purpose may question on oath the creditor and the debtor and any witness produced on behalf of either of them.

(2) At a default hearing, unless the contrary is shown,

a) the debtor shall be presumed to have the ability to pay the arrears owing and to make subsequent payments under the maintenanceorder unless the maintenance order is an agreement or an application to vary the maintenance order has been commenced but notconcluded, and

b) a statement of arrears prepared and served by the Director is presumed to be correct. (Emphasis added) [6] After the inquiry, Section 30(1)(a),(

b) or (c) (below) of the Act permits the Court to give an order commensurate with thedebtor’s ability to pay. 1. The Onus and the Presumption [7] On first glance Section 28(2) of the Maintenance Enforcement Act appears to create a classic rebuttable presumption that thedebtor has the ability to pay. In such a case, once some evidence is tendered to the contrary, the benefit of the presumption would be removed and the evidence simply stands on its own: Sopinka et al, The Law of Evidence in Canada (3rd) ed, para 4.25 et seq. [8] However, in Grant v Wolansky (at para 16), Côté, J. (sitting in Queen’s Bench), held that (then) section 22(2)(

a) goes furtherthan that; transferring the onus of proof to the debtor throughout: 16 [The] Statute reverses the onus of proof and presumes that the debtor has the ability to pay: Maintenance Enforcement Act s.22(2)(a).

Section 24 says that the question is inability to pay “because of illness, unemployment or other valid reasons”. I read s. 22(2)(

a) as transferring the true onus of proof, so that merely giving some evidence is not enough to shift the onus back. The onus rests on Mr.Wolansky throughout, and he must give weighty enough evidence to satisfy the trier of fact. The classic case is Geel v Wpg. Elec. Co. (UK JCPC), [1932] 3 W.W.R. 49, 52-3, [1932] A.C. 690, [1932 4 D.L.R. 51 (PC(Can)). A case on similar maintenancelegislation is Longstaff v Longstaff, supra, at 11 (R.F.L.). (Emphasis added) [9] The onus of proof remains on the debtor to prove inability to pay through ‘illness, unemployment or other valid reasons’(section 30(1)).

It is not a question of the debtor tendering in some evidence to the contrary and, in doing so, moving the burden or theonus to the Director. [10] Section 28(1)(

a) also removes the presumption where, as here, ‘an application to vary the maintenance order has beencommenced but not concluded’. But, here as well, removing the presumption does not shift the onus to the Director, it remains on thedebtor in either case. 2. Procedure [11] These hearings are typically resolved with an Interim Order, or an Order relating to the production of financial informationand an Interim Order given on consent.

The Director and the Debtor are, usually able to work something out. [12] Where they are not able to do so, the Director argues that the scheme of the Act contemplates a brief hearing (if necessary)with the Director’s counsel conducting a cross-examination of the debtor on his sworn Statement of Finances. Owing to the presumptionin

section 28, this should usually be enough to decide the matter, though where the balance is even, it should also be open to the Directorto call further evidence, either in rebuttal or on the question of credibility. [13] In this case, the hearing was protracted. [14] Debtor’s counsel put Mr. Smith on the stand and made him available for cross examination while reserving a right to re-examine. [15] In my view, the preferred procedure would be to tender the debtor’s sworn statement of finances into evidence as an exhibitand then give debtor’s counsel an opportunity to examine the debtor in-chief.

The Director would then have the right to cross examineand, if necessary, call evidence in rebuttal. In this case Mr. Smith was cross examined at length by both the Director’s counsel, and thenby counsel for Ms. Alayo. The Director called rebuttal (surveillance) evidence. 3. The Ability to Pay

[ 16 ]

Section 30 of the Act provides: Court order 30(1) The Court of Queen's Bench, unless it is satisfied that there are no arrears payable under the maintenance order, or that the debtor is unable because of illness, unemployment or other valid reasons to pay the arrears or to make subsequent payments required under the maintenance order, may do one or more of the following: (

a) require the debtor to discharge the arrears payable by such periodic payments as the Court directs; (

b) require the debtor to discharge the arrears payable in full by a specified date; (

c) require the debtor to comply with the maintenance order to the extent of the ability of the debtor to pay, but an order under this clause does not affect the accruing of arrears payable under the maintenance order; (

d) require the debtor to provide security in such form, including an assignment of debt or wages, as the Court directs for payments in arrears and subsequent payments; (

e) require the debtor to provide forthwith to the Court, the Director or a person specified in the order particulars of any change of address or employment as soon as it occurs; (

f) require the debtor to forthwith provide to the Director any information concerning the debtor's financial affairs; (

g) require the debtor to forthwith provide to the Director any information with respect to property or funds that are legally owned or otherwise held by a corporation or another person and that (

i) the debtor, or another person on behalf of the debtor, is using or otherwise dealing with or is in a position to use or otherwise deal with in a manner that is or would be similar to that of a person who legally owns or otherwise holds the property or funds, or (ii) the debtor, or another person on behalf of the debtor, is in a position to compel or otherwise influence the corporation or other person (

A) to use or deal with as directed by the debtor, or other person on behalf of the debtor, or (

B) to permit the debtor, or other person on behalf of the debtor, to use or otherwise deal with in a manner that would be similar to that of a person who legally owns or otherwise holds the property or funds; (

h) if the Court has reason to believe that, with respect to property or funds that are legally owned or otherwise held by a corporation or another person, the debtor or another person on behalf of the debtor is exercising or has exercised authority over that corporation or person within the meaning of section 31(1), require the corporation or that other person to forthwith provide to the Director any information concerning that property or those funds and the relationship of the company or that other person with the debtor; (

i) imprison the debtor continuously or intermittently for not more than 90 days unless the arrears payable are sooner paid; (

j) imprison the debtor continuously or intermittently for not more than 90 days if the debtor defaults in any payment ordered under this subsection; (

k) appoint the Director or another person as a receiver of money owing or payable to, or to become owing or payable to, or earned or to be earned by the debtor to the extent of the default and, in addition, to the extent of any periodic payments payable or to become payable under the maintenance order or an order under this subsection.

(2) The Court of Queen's Bench may vary an order made under subsection (1) if there is a material change in the circumstances of the debtor.

(3) An order for security under subsection (l)(

d) or a subsequent order of the Court may provide for the realization of the security by seizure, sale or other means, as the Court directs.

(4) Imprisonment of a debtor under subsection (l)(

i) or (

j) does not discharge arrears payable under the maintenance order.

(5) Proof of service on the debtor of the maintenance order is not necessary for the purpose of a default hearing.

(6) If a debtor defaults in payment under an order made under subsection (1), the default is deemed to be a default in payment under the maintenance order. [ 17 ] Any Order given must be commensurate with the current circumstances of the debtor. The debtor’s prior standard of living or his past circumstances are essentially irrelevant; Frank v Beaver , at paras. 16, 17 . [ 18 ] Although there is no direct counterpart to section 65(2)(

a) of the Family Law Act , RSA 2000, c F 4 .5, or

section 19(

a) of the Federal Child Support Guidelines at work here, there is an implicit power to impute income where there is a failure to disclose, or a deliberate evasion of obligations. (eg Hartley v Del Pero , Hunt v Smolis-Hunt , Longstaff v Longstaff and Mercer v Mercer ). [ 19 ] The Court will rank finality over strict proof, mindful of the onuses. The object is to balance a fair level of payment without imposing an impossible burden on the debtor (eg Hartley (para 29 )).

It is rarely a case where the court is able to act with any mathematical precision such as applying the Superintendent’s standards under the Bankruptcy and Insolvency Act ( though that might provide a useful benchmark for determining hardship). The Order has to be pragmatic and something more than wishful thinking.

i) Unemployment [ 20 ] Mr. Smith lives in the basement of his ailing parent’s home in rural Alberta. He commutes to Edmonton from time to time in a company vehicle owned by a company he once owned. (On this point Mr. Smith may wish to read Grant v Wolansky , ( above) where the Court incarcerated the debtor and liquidated the company.) He drives his vehicle despite the fact that the Maintenance Enforcement process has deprived him of a driver’s license. Mr. Smith’s evidence was that he does not work at this company though he attends there periodically and is seen in coveralls.

He manages to live and pay interim support by taking loans from friends and doing ‘odd jobs’. [ 21 ] Mr. Smith, has demonstrated that he is unemployed - at least to the point that he is not conventionally employed. I have difficulty believing that he retains no connection to his former company and highly doubtful that he drives no income from it.

He has made efforts to gain conventional employment but his skill-set as a machinist is out of date and this is not the ideal economy for obtaining this type of work. ii) Imputed Income [ 22 ] The evidence gives rise to many suspicions, and demonstrates no visible means of support that can be reconciled with the debtor’s circumstances, or his ability to pay the ongoing support obligations set out in the interim orders. However, it does not sufficiently disclose the intentional element necessary to impute income. iii) Ability to pay [ 23 ] Over all Mr. Smith’s evidence was evasive, vague, and non-responsive. In

summary, it did not really prove anything other than that Mr. Smith is not working in any conventional sense and he has a seeming ability to pull money out of thin air. However doubt is not proof. There is a large gap between being doubtful about Mr. Smith’s sources of income and determining an accurate number that is commensurate with his ability to pay; other than that he has been managing to pay $2,000.00 per month under the Interim Orders. Disposition [ 24 ] In the circumstances I see no reason to disturb the status quo.

The Interim Order of $2,000.00 per month shall continue and, in light of Justice Simpson’s Order, all towards the arrears until the support obligations are revisited at the trial concerning his support obligation. Dated at the City of Edmonton, Alberta this 21 st day of March, 2016. W. S. Schlosser M.C.C.Q.B.A. Appearances: Michael Pollock Pollock and Pollock for the Applicant Jeff Mayan Alberta Justice- Social Enhancement Legal Team

for the Director of Maintenance Enforcement Sean Schaefer Schaefer Law for the Respondent