Jenkins v. Jenkins, 2012 NSSC 117

SUPREME COURT OF NOVA SCOTIA (FAMILY DIVISION) Citation: Jenkins v. Jenkins, 2012 NSSC 117 Date: 20120307 Docket: 1206-6265 Registry: Sydney Between: Elizabeth Gayle Jenkins Applicant v. George Robert Jenkins Respondent LIBRARY HEADING Judge: The Honourable Justice Theresa Forgeron Heard: February 29, 2012, and March 6, 2012, in Sydney, Nova Scotia Oral Decision: March 7, 2012 Written Decision: April 4, 2012 Subject: Family Law Issues: - Imputation of income for spousal support purposes. - Piercing of corporate veil of minority share holder. - Interim spousal support, ongoing and retroactive. - Costs.

Result: An interim spousal support order was granted based upon an imputed income to the husband. The corporate veil was pierced where the husband exercised sole and defacto control of the company, despite his minority share holding status. The husband regularly used corporate funds for personal purposes. A negative inference was drawn from the husband’s failure to disclose corporate financial information. A review of the legal authorities was canvassed in the decision. Costs were awarded given the outcome, but reduced because of lack of memorandum of law.

THIS INFORMATION SHEET DOES NOT FORM PART OF THE COURT'S DECISION. QUOTES MUST BE FROM THE DECISION, NOT THIS LIBRARY SHEET . SUPREME COURT OF NOVA SCOTIA (FAMILY DIVISION) Citation: Jenkins v. Jenkins, 2012 NSSC 117 Date: 20120307 Docket: 1206-6265 Registry: Sydney Between: Elizabeth Gayle Jenkins Applicant v. George Robert Jenkins Respondent Judge: The Honourable Justice Theresa M. Forgeron Heard: February 29, 2012, and March 6, 2012, in Sydney, Nova Scotia Oral Decision: March 7, 2012 Written Decision: April 4, 2012 Counsel: Lisa Fraser-Hill, for the applicant Darlene MacRury, for the respondent By the Court: [ 1 ] Introduction

[ 2 ] Mr. and Ms. Jenkins were married for 38 years before they separated in September 2010. During their marriage, the parties worked in a family owned business. Both were employed by the business - Ms. Jenkins as the bookkeeper, and Mr. Jenkins as the operator. [ 3 ] After separation, Ms. Jenkins remained in the matrimonial home, while Mr. Jenkins moved to another property which was owned by the parties. Mr.

Jenkins lived in that property until 2012, when he moved into a new apartment built on land that was purchased after separation. [ 4 ] The parties could not reach agreement on the issue of interim spousal support. Ms. Jenkins therefore applied for interim relief on October 12, 2011. The first available date for the hearing of the motion was February 29, 2012. At that time, the court heard the evidence of the parties. Submissions were presented by counsel on March 6, 2012.

The matter was adjourned for oral decision on March 7, 2012 to give counsel time to prepare calculations from the Spousal Support Advisory Guidelines, and to allow the court time to review the law, the submissions, and the evidence. [ 5 ] Issues [ 6 ] The following issues will be determined in this interim decision:

a) What is the income of Ms. Jenkins?

b) What is the income of Mr. Jenkins?

c) Should interim spousal support be awarded, and if so, in what quantum? [ 7 ] Analysis [ 8 ] What is the income of Ms. Jenkins? [ 9 ] The income of Ms. Jenkins is not in dispute. She earns $350 per week as the bookkeeper of the business. In prior years, Ms. Jenkins was laid off from the business during the down season. In 2011, Ms. Jenkins earned $15,536 from employment and EI earnings. Ms. Jenkins does not know if she will be laid off this year. If she is not laid off, Ms. Jenkins will earn $18,200 for the year. [ 10 ] Ms. Jenkins is 59 years old and has a grade 8 education.

In the past, she worked at Seaview Manor, but this work was interrupted because of a back injury. Ms. Jenkins eventually began to get paid for her work in the family business in 2004. [ 11 ] Ms. Jenkin ’ s income earning capacity is therefore in the $15,500 to $18,200 a year range. She is working to capacity. The interim maintenance order will be based upon two scenerios - one, when Ms. Jenkins is employed by the business earning $350 per week, and the second, when Ms. Jenkins is in receipt of EI benefits. [ 12 ] What is the income of Mr. Jenkins?

[13] Position of the Parties [14] Mr. Jenkins stated that his income is limited, especially at present, because he is waiting for his EI claim to be processed. Mr.Jenkins stated that he earned $32,254 in 2009; $41,366 in 2010; and approximately $34,500 in 2011. He asked that spousal support bebased upon the income noted in his past returns, and also in recognition of the fact that he currently has no income as he awaits his EIclaim to be processed. During submissions, his counsel conceded that other amounts should also be added into Mr. Jenkins’ incomegiven the evidence. Ms. MacRury stated that Mr.

Jenkins has an actual, annual income of approximately $50,000. [15] In addition, Mr. Jenkins stated that his business did not perform well last year. He noted that the business had feweremployees. Mr. Jenkins further stated that his minority share holder status limited his ability to withdraw funds from the business.Finally, Mr. Jenkins stated that the court cannot pilfer, plunder, and pillage from the company to effect the payment of spousal support. [16] In contrast, Ms. Jenkins stated that Mr. Jenkins has an ability to pay spousal support because he earns an income in excess of$90,000 a year.

She stated that Mr. Jenkins controls the corporation and has consistently used corporate income for personal purposes. [17] Review of Law [18]

Section 15 of the Divorce Act provides the court with the authority to grant an interim order for spousal support. In so doing, Iam directed to examine the means of the parties. Means includes, not only income earned, but also capital and income earning capacity. The Supreme Court of Canada confirmed this expansive definition in Leskun v. Leskun 2006 SCC 25 at para 29: There is no support in the case law or in logic for the proposition that the Chambers judge was wrong to take into account the appellant'scapital assets acquired after the marital break-up. In Strang v.

Strang, (SCC), [1992] 2 S.C.R. 112 (S.C.C.), the Courtstated that the traditional understanding of the word "means" includes, "all pecuniary resources, capital assets, income from employmentor earning capacity, and other sources from which the person receives gains or benefits" (p. 119). J. Payne and M.

Payne elaborate asfollows: The word means includes all pecuniary resources, capital assets, income from employment or earning capacity, and any other sourcefrom which gains or benefits are received, together with, in certain circumstances, money that a person does not have in possession butthat is available to such person. (Canadian Family Law (2001), at p. 195). [19] Further, imputation of income is not restricted to child support cases, and indeed the same principles are at play whendetermining income for spousal support purposes: Shaw v. Shaw 2009 NSSC 353 at para 30, and Poirier v.

Poirier 2010 ONSC 920 atpara 85. [20] Courts have grappled with the issue of income imputation as it relates to corporate holdings and self employed business peoplefor many years. In making decisions, courts have underscored the marked distinction between the calculation of income for RevenueCanada purposes, and the calculation of income for support purposes re: Wilcox v. Snow 1999 NSCA 163 paras 22 - 24. For supportpurposes, courts have, and will, pierce the corporate veil in appropriate circumstances. [21] Several themes have emerged from the case law as it relates to corporate holdings.

First, courts will access the pre-taxcorporate income for support purposes. In Gosse v. Sorensen-Gosse 2011 NLCA 58, the Newfoundland Court of Appeal reviewedappellate decisions before concluding that the trial judge erred in failing to consider the pre-tax corporate income of a company ownedby one of the parents. As a result, the Court of Appeal imputed 85% of the pre-tax corporate income as income for child supportpurposes. [22] Second, the onus of proof falls upon the director, officer, or shareholder to show that the pre-tax corporate income is notavailable for support purposes: Gosse v.

Sorensen-Goss, supra, at para 102; Hausmann v. Klukas 2009 BCCA 32 at paras 51 - 61,with leave to appeal to the Supreme Court of Canada refused at 2009 SCCA 135. Evidence of legitimate business needs must be lead

before a court can conclude that the corporation requires its pre-tax income as noted in Kowalewich v. Kowalewich 2001 BCCA 450,paras 58-60. [23] Third, minority share holders are not necessarily exempt from having pre-tax corporate income imputed to them for supportpurposes as stated in Kowalewich v. Kowalewich, supra, para 48 and Chapman v. Summer 2010 BCCA 237. The onus remains onthe shareholder to prove otherwise.

The outcome will depend upon the facts of the case. [24] Fourth, personal benefits paid on behalf of a shareholder, officer, or director by a corporation will be considered in thecalculation of income, often by adding that amount back into the pre-tax corporate income that thus becomes available as income forsupport purposes as noted in: Hrenyk v.

Berden 2011 SKQB 305 at para 132: 132 In determining the pre-tax income of SFF for the purposes of spousal support, all amounts paid by SFF as salaries, wages,management fees or other benefits to the respondent, if they are excessive or unreasonable, should be added to the pre-tax income of thecorporation.

Some examples of benefits to a shareholder that should be added back into the corporation's total income would be personaluse of a company automobile, company paid group life insurance, company paid personal accountant and legal fees, personal use ofcompany property, use of company inventory, and payment of personal expenses such as travel, telephone or utilities by the company. [25] Fifth, negative inferences are correctly drawn when there is a lack of disclosure and a lack of relevant evidence before thecourt. The words of the Supreme Court of Canada in Leskun v.

Leskun, supra, bear repeating, at para 34: 34 In all of these circumstances, the appellant has a poor platform from which to launch an attack against the trial judge's conclusionregarding his assets and liabilities. As Fraser J. commented in Cunha v. Cunha (1994), (BC SC), 99 B.C.L.R. (2d) 93(B.C. S.C.), at para. 9: Non-disclosure of assets is the cancer of matrimonial property litigation. It discourages settlement or promotes settlement which areinadequate. It increases the time and expense of litigation.

The prolonged stress of unnecessary battle may lead weary and drainedwomen simply to give up and walk away with only a share of the assets they know about, taking with them the bitter aftertaste of areasonably-based suspicion that justice was not done. If problems of calculation exist the appellant is largely the author of his own difficulties. I would not interfere on that basis. [26] Similarly, the Nova Scotia Court of Appeal has also commented on the type of evidence that must be adduced by businesspeople who seek relief from the court in Wilcox v. Snow, supra. [27] Decision [28] I find that Mr.

Jenkins has an income earning capacity of approximately $82,000 for the purposes of this interim motion. Hispersonal income tax returns, his sworn statement of income, his sworn statement of expenses, and his affidavit do not disclose the trueincome position of Mr. Jenkins for spousal support purposes. I reach this conclusion for the following reasons:

a) Contrary to what was stated by Ms. MacRury, Mr. Jenkins is in defacto control of the business, despite his minority share holdingstatus. He is the only person with authority to sign cheques. He is the only person who controls the corporate business credit card. Hedetermines who gets paid and in what amounts. He determines who gets hired and who gets layed off. He has sole and absolute controlof every aspect of the business. No other person plays any decision making role.

b) Although Ms. Jenkins is a share holder, she has no control over cheques or the credit card. She does as she is instructed to do byMr. Jenkins. Further, Ms. Jenkins does not receive all of the financial information of the company. Mr. Jenkins is selective in what heprovides to Ms. Jenkins, even though she is the bookkeeper for the business.

c) In addition to the parties, the business has two other shareholders. These share holders are not involved with the business. They have not invested in the business, nor do they receive any monetary benefit from the business. They have absolutely nothing to do with the business. They were given a share holding interest so that Mr. and Ms. Jenkins could collect EI benefits.

d) Mr. Jenkins did not provide any convincing proof that the business was doing poorly. He provided no financial statements, nor corporate tax returns. The type of proof supplied was not clear, convincing, or cogent.

e) The evidence that was adduced strongly suggests that the business is in a healthy financial position. An expensive, new truck was purchased with cash in 2011; no financing was required. There was no evidence of any business debt or long term financing. The bank account had in excess of $230,000 in it. In the past, the business usually kept a bank balance of under $100,000. The business buys RRSPs for Mr. Jenkins in the weekly amount of $200. The business acquired investments in Mr. Jenkins ’ name in the amount of $7,500 in 2011. The business pays for many personal expenses of Mr.

Jenkins, including the building of his apartment and the acquisition of some personal furnishings. The business also paid for two garages to be built in the past year. The evidence does not indicate any pressing corporate business need.

f) Although Mr. Jenkins did not provide the corporate tax returns, nor corporate financial statements, the evidence shows that Mr. Jenkins treated the business income and business assets as his personal income and assets. Cross examination confirmed that many of Mr. Jenkins ’ personal expenses are paid by the company. The business income was, and continues to be, available for Mr. Jenkins ’ use, and at his sole discretion.

g) Mr. Jenkins was not credible. The court cannot place any reliance on Mr. Jenkins ’ sworn evidence given the exhibits and the cross examination evidence. Mr. Jenkins was evasive and misleading in much of his evidence.

h) The failure of Mr. Jenkins to supply the corporate pre-tax income of the business does not prevent the court from imputing income. Mr. Jenkins controls these documents. He cannot profit from the lack of disclosure.

i) Mr. Jenkins ’ income is substantially more than he stated. Mr. Jenkins ’ income is composed of at least the following: T4 earnings $16,500 EI earnings $18,000 RRSPs $10,400 Investment $ 7,500 Personal expenses paid by business $30,000 Total $82,400

j) In addition, Mr. Jenkins also has rental income available to him. I did not consider this for support purposes because it is an interim motion and little rent was actually being collected.

[ 29 ] In

summary, I find that Mr. Jenkins has an income earning capacity of $82,500 for spousal support purposes. [ 30 ] Should interim spousal support be awarded, and if so, in what quantum? [ 31 ] The factors and objectives that I must consider on an interim motion are set out in

section 15 of the Divorce Act . I have considered these provisions in light of the evidence. I also have considered the reasonable needs of the parties in the context of their lifestyle and in the context of their means and circumstances. In setting the proper support payment, I note the following:

a) This is a long term marriage where compensatory and non-compensatory factors dictate the payment of support as stated in

section 15 of the Divorce Act .

b) Mr. Jenkin ’ s lifestyle has not been negatively impacted by the separation. Ms. Jenkins has been negatively impacted. Many of her monthly bill payments are in arrears. I do recognize that Ms. Jenkins lives in the mortgage free matrimonial home, that is fully furnished and equipped.

c) The amount sought by Ms. Jenkins for spousal support is reasonable in the circumstances of this case and given the needs and circumstances of the parties. Ms. Jenkins seeks a monthly spousal support payment of $1,500 when employed and $2,000 when in receipt of EI.

d) The Spousal Support Advisory Guidelines suggest the payments requested based upon Mr. Jenkins earning an income of $50,000, and not the $82,000 figure that has been found by the court. [ 32 ] I therefore award the requested spousal support of $1,500 per month when Ms. Jenkins is employed in the business earning $350 per week; and the sum of $2,000 per month should Ms. Jenkins be layed off from the business and collecting EI.

The support will be payable in two equal monthly instalments on the 7 th and 21 st of each month, commencing March 7, 2012. [ 33 ] A retroactive award will be payable for five months from October, 2011 to February, 2012. Ms. Jenkins filed her motion in October and should not be penalized because an early court date was not available. Because the retroactive award will be a lump sum payment, it will be tax neutral. In the circumstances, Mr. Jenkins will be required to pay $4,500 in retroactive support for the stated period. [ 34 ] Ms. Jenkins asked that the maintenance be secured against Mr.

Jenkins ’ income tax refunds, which are in excess of $6,000. I have authority to do so under

section 15 of the Divorce Act . It is appropriate that I exercise my discretion in the circumstances of this case. The tax refund will be used to pay the retroactive award forthwith and the balance will be applied to pay a portion of the March and April spousal support order. [ 35 ] Conclusion and Costs [ 36 ] Ms. Fraser Hill is to draft the order and forward it to Ms. MacRury for her signature. If there are drafting difficulties, counsel are to contact my assistant to arrange a brief chambers appearance. [ 37 ] Ms.

Jenkins requests costs in the amount of $1,500 given the complexity and the circumstances of the case. Mr. Jenkins disputes the cost award stating that he has provided support by allowing Ms. Jenkins to work as a book keeper during the down season. [ 38 ] I have considered the rule and the submissions. I note this file required three court appearances. Although affidavits were

filed, neither party provided chambers memorandum as required by the rules. Ms. Jenkins was wholly successful. In the circumstances of this case, I award $750 in costs, payable within 15 days. Forgeron, J.