Roberts v. Roberts, 2011 ONCJ 785

Toronto Registry No. D952/99 - A1 DATE: 2011·VI·27 CITATION: Roberts v. Roberts , 2011 ONCJ 785 ONTARIO COURT OF JUSTICE BETWEEN: LISA MARIE ROBERTS, Applicant — AND — BRYAN EDWARS ROBERTS, Respondent Before Justice Marion L. Cohen Reasons for Judgment released on 27 June 2011 Lisa Marie Roberts .......................................................................................... on her own behalf John P. Schuman ............................................................................................. for the respondent [ 1 ] JUSTICE M.L.

COHEN:— This is a ruling on a motion by the applicant for an order for interim disbursements. Specifically the applicant is seeking an order that the respondent pay a portion of her legal fees and the cost of an accountant she wishes to retain. [ 2 ] The parties are the parents of Hannah Bryanne Roberts, born August 31, 1998. They were married on February 4, 1998, and separated on July 21, 1999. Pursuant to an order of this court dated June 5, 2000, the applicant has custody of Hannah, subject to access by the respondent, which he has not exercised. The applicant has one other child from a second relationship.

On June 30, 2003, the respondent was ordered to pay the applicant $425 per month as support for Hannah, based on his annual income of $49,500. In the following years, the respondent produced his tax returns to the applicant annually, and increased his child support based on increases in his income. On November 26, 2009, the applicant commenced a motion to change this support order. [ 3 ] In her motion to change, the applicant sought an order of support under the Child Support Guidelines , O.

Reg. 391/97, as amended, commencing on January 1, 2009, in the amount of $2,533 per month based on an annual income of $322,803. She claimed retroactive child support in the amount of $153,250 as of December 31, 2008, and that this sum be paid in accordance with a payment schedule. The applicant also asked that the respondent be ordered to pay 97% of special expenses for summer camp and babysitting. Finally she sought an order that the respondent maintain Hannah on his medical health and benefits plan.

Some of these claims will now alter as a result of intervening events. [ 4 ] In his response to the motion to change, the respondent sought an order for ongoing child support in the amount of $2,098 per month based on an annual income of $264,000, commencing on January 30, 2010. He was agreeable to an order that he pay special expenses for day care and camp by paying the service providers directly. He denied any obligation to pay retroactive support. The respondent maintained that it was “simply not true” that his income was higher than he had reported on his tax returns.

He states that the applicant deliberately chose not to pursue a change in support and that he has, in fact, overpaid support. In the event that this matter does not settle, the respondent seeks repayment of any overpayment of support found. The respondent also expressed doubt that Hannah was his child. His paternity has now been confirmed through DNA testing. [ 5 ] The applicant and Hannah reside in Vancouver, British Columbia. At the time she commenced her motion to change, the applicant stated that she was employed by a hair salon.

She showed a monthly income of $1,761(without including child support) in her financial statement. Unexpectedly, in November 2010, Hannah was diagnosed with a highly aggressive form of Crohn’s disease. According to her family physician, Hannah has a “very difficult and critically serious disease affecting her bowel as well as her entire system. . . . She has had a procession of setbacks and complications”. She is very ill. Hannah’s significant and on-going needs, both medical and psychological, have affected the applicant’s ability to work. [ 6 ] The applicant is required to be “on call” to attend to Hannah.

Hannah is often too ill to go to school, or she can only handle part of a school day. She takes numerous medications, each with a separate regimen, which the applicant administers. In addition, Hannah has contracted a serious secondary infection that may require her to take antibiotics in perpetuity. As well as her medical appointments, Hannah is receiving counselling from a psychologist at the BC Children’s Hospital to assist her in dealing with the devastating consequences of her disease. The psychologist states that Hannah requires “an accessible primary caregiver . . . from

both a symptom management perspective and psycho-emotional support” until she achieves stable medical remission. The doctor commends the applicant: The situation has demanded considerable investment of extra time, diligence and care on the part of her mother who continues to be very devoted to the situation regarding her daughter’s health. [ 7 ] As a result of Hannah’s illness, the applicant has been unable to work on a consistent basis. She is receiving Employment Insurance benefits.

Her latest financial statement shows a monthly income of $3,533, comprised of employment insurance benefits ($544), child tax credit ($236) and child support payments ($2,533 plus $220). At the same time, she is incurring numerous additional expenses occasioned by Hannah’s illness, including the cost of dietary supplements ($7 to $14/week). Her expenses are modest. She pays $1,000 per month towards her debts. Although there was no motion before the court to vary the temporary order, I asked the respondent whether he would agree to cover the costs of these expenses as part of his child support obligation.

He refused. His position was that dietary supplements were “food” and did not qualify as a special expense. [ 8 ] The respondent is self-employed. At the time these proceedings commenced, he was the co-owner of two businesses. The main business, Sani-Service (1283465 Ontario Inc.) was a franchise that provides cleaning services and hygiene products to its clients. The respondent owned an 80% interest in the Sani-Service franchise. This franchise has now been sold. In June 2009, the respondent commenced a second business, Hi-Rise, which provides air freshening services to condominiums for their waste rooms.

This business is currently operative. The respondent owns a 90% interest in Hi-Rise. [ 9 ] On February 18, 2010, at the second appearance of this matter, the parties consented to an interim child support order (without prejudice) in the amount of $2,533 per month based on the line 150 income of $322,803 shown in the respondent’s 2008 tax return. In addition, the respondent agreed to the release to the applicant of an additional $32,000 which had been retained by the Family Responsibility Office.

Although the respondent had increased his support payments over the years, the applicant had not moved to vary the support order. As a result the Family Responsibility Office held on to the funds. The respondent states that he has overpaid support by $1,878, and seeks credit against his future support obligations. [ 10 ] The respondent retained an accountant, Melanie Russell of Kalex Valuations, to calculate the income available to him from 2007 to 2009 for child support purposes. Ms.

Russell’s report, dated April 28, 2010, (The “Kalex Report”), concludes that the available income from his shareholding of Sani-Service and Hi-Rise which would be available to the respondent for child support purposes is as follows: • 2007 $107,000 line 150 income = $100,206 • 2008 $379,000 line 150 income = $322,803 • 2009 $271,000 line 150 income = $264,384 [ 11 ] In calculating the respondent’s average income for this period, Ms. Russell excluded the respondent’s 2008 income on the basis that this income was an “unusual and non-recurring” result from events of that year.

The report concludes that the respondent’s average income for child support during 2007 to 2009 is $189,000. [ 12 ] The applicant retained an accountant, Jonathan M. Hames, to respond to the Kalex Report. Because he stated he had insufficient disclosure, Mr. Hames prepared what he termed a preliminary report. In the report, dated May 16, 2010, he concludes that the income figures should have been: • 2007 $107,000 • 2008 $531,000 • 2009 $404,000 [ 13 ] Mr. Hames calculated the respondent’s average income as $252,000, apparently excluding the 2008 figure, despite his stated disagreement with Ms.

Russell on this point. [ 14 ] Although Mr. Hames disputed Ms. Russell’s findings in several areas, the most significant area of contention was the Kalex treatment of the working capital requirement (retained earnings) of Sani-Service. Subsequent to his preliminary report, Mr. Hames was provided with further disclosure and an opportunity to meet with the respondent (August 6, 2010). In a letter dated October 18, 2010, Mr. Hames states that he was not provided with a satisfactory explanation regarding the working capital requirements.

Thus, the appropriate treatment of the working capital requirements remains an area of contention in the calculation of retroactive support. [ 15 ] It is not clear, since he is silent on the point, whether Mr. Hames otherwise agreed with the conclusions of the Kalex report. The respondent submits that Mr. Hames’ silence means he accepts the Kalex conclusions. This is a fair inference in my view. Furthermore, the respondent contends that, even if Mr.

Hames’ treatment of the retained earnings were proven correct, the difference would amount to a total of $7,459.00 owing to the applicant over the three years of retroactive support. On a case conference basis, I found the argument in support of this conclusion persuasive. The respondent argues that a dispute over this amount, which is less than the interim disbursements sought, would not justify an order for interim disbursements. [ 16 ] On September 3, 2010, the respondent advised the applicant through counsel that he was selling Sani-Serve. This business has now been sold back to the franchise owner.

The respondent continues to operate Hi-Rise. Unfortunately the issue of ascertaining the respondent’s income has been made more complex by the sale of Sani-Service. [ 17 ] According to documents filed by the respondent, the purchase price for Sani-Service was $1,100,000, subject to post- closing adjustments. The agreement of purchase and sale provides that the respondent was to be paid $60,000 in cash, and the balance was to be payable by way of quarterly periodic payments in the sum of $62,465.34, secured by a promissory note, the last payment due September 30, 2013. [ 18 ] Mr.

Hames was advised that the Sani franchise has been sold. Although he was not provided with the details of the sale,

which have now been disclosed, in his letter of October 18, 2010, Mr. Hames states: It would be reasonable to assume that the sale price of San-Service has taken into account Mr. Robert’sloss of future earnings from Sani as a result of the sale. Accordingly, Mr. Robert’s income in futureyears should be adjusted by a suitable portion of the Sani proceeds. [19] He does not indicate what a suitable portion would be. [20] The respondent’s current financial statement, filed on May 16, 2011, shows an annual income of $96,000 and expenses of$81,513.48. He shows a net worth of $1,089,466.

His 2010 tax return shows a line 150 income of $619,067, comprised of $192,000employment income, $4,500 interest income, and $422,567 taxable capital gains. [21] On May 31, 2011, the respondent filed financial statements for Hi-Rise for the year ended January 31, 2011. Assubmitted by his counsel in court, Hi-Rise appears to be progressing well.

Although the financial statement shows a deficit for 2011,sales have almost doubled since 2010. [22] While the parties were apparently close to resolution on the retroactive support issue, the unexpected intervening events(the sale of the business and the child’s illness) have made settlement of the on-going support difficult. The parties disagree about whatportion, if any, of the respondent’s income from the sale of Sani-Service should qualify as income for purposes of calculating 2010 andon-going child support.

They almost certainly will disagree on the respondent’s liability for new special expenses for Hannah, whichmay be substantial given her special needs. Furthermore, a court may consider the guideline figure to be inappropriate given these needs(clause 4(b)). These disagreements are legal and factual. Whether pursuing a settlement, or taking the matter to trial, each party willrequire the assistance of a qualified accountant and legal counsel. The respondent has the funds to retain both the accountant and thelawyer.

The applicant does not. [23] On January 12, 2011, the applicant filed a notice of intention to represent herself in these proceedings. She has beenunable to obtain a legal aid certificate in British Columbia or Ontario and she has no further financial resources. Although Mr. Robertsargues that the applicant leads an extravagant life-style and has significant undisclosed income, I do not so find based on the evidencebefore me. The applicant has two children to support, one of whom is severely ill, on a limited budget. [24] On March 15, 2011, the respondent filed a notice of intention to represent himself.

Despite the notice, Mr. Roberts wasrepresented on the hearing of this motion by the same counsel who has appeared for him throughout. The respondent has a successfulbusiness, a substantial income, and no dependents. I am confident he will have the assistance of counsel, and an accountant, should thismatter go to trial. I find it highly unlikely he will be unrepresented in any step in this case where his interests might be adverselyaffected. [25] The applicant seeks an order for interim disbursements to pay for legal counsel and expert accounting-valuation services.

An order for interim disbursements is contemplated by subrule 24(12) of the Family Law Rules, O. Reg. 114/99, as amended, whichreads as follows:

(12) Payment of expenses.— The court may make an order that a party pay an amount of money toanother party to cover part or all of the expenses of carrying on the case, including a lawyer’s fees. [26] The ordering of interim disbursements is discretionary. The discretion should be exercised in a manner consonant withthe objectives of the rules. The primary objective of the rules is to enable the court to deal with cases justly. The court is required toapply the rules to promote that objective. Dealing with a case justly includes, inter alia (

a) ensuring that the procedure is fair to all parties; (

b) saving expense and time; (

c) dealing with the case in ways that are appropriate to its importance and complexity. As Justice Sherrill M. Rogers observed in Stuart v. Stuart, , 24 R.F.L. (5th) 188, [2001] O.J. No. 5172, [2001] O.T.C.965, 2001 Cars​well​Ont 4586 (Ont. Fam. Ct.): The duty in the court to ensure a fair procedure means that both parties should be able to request andgive disclosure and to tackle complex valuation issues equally. One party should not be disadvantagedin the litigation by being unable to test the evidence of the other party. In Stuart v.

Stuart, supra, Justice Rogers summarized what she described as the themes in the case law concerning interim disbursements. Some of these themes have application in this case, to wit: • A claimant must demonstrate that, absent the advance of funds for interim disbursements, theclaimant cannot present or analyze settlement offers or pursue entitlement: see Hill v. Hill(1988), (ON SC), 63 O.R. (2d) 618, 27 C.P.C. (2d) 319, [1988] O.J. No.3035, 1988 Cars​well​Ont 413 (Ont. H.C.) and Airst v. Airst, (1995), 58 A.C.W.S. (3d) 265,[1996] W.D.F.L. 060, [1995] O.J. No. 3005, 1995 Cars​well​Ont 2176 (Ont. Gen.

Div.). • It must be shown that the particular expenses are necessary: Lossing v. Dmuchowski (2000), 95A.C.W.S. (3d) 701, [2000] W.D.F.L. 238, [2000] O.J. No. 837, 2000 Cars​well​Ont 754 (Ont.S.C.). • The claim or claims being advanced in the case must be meritorious as far as can be determinedon the balance of probabilities at the time of the request for disbursements.

• The court interprets the new Family Law Rules to require the exercise of the discretion in subrule 24(12) on a less stringent basis than the cases that call for such only in exceptional cases. The discretion should be exercised to ensure all parties can equally provide or test disclosure, make or consider offers or possible go to trial. Simply described, the award should be made to level the playing field. • An order under subrule 24(12) should not immunise a party from cost awards.

The order is to allow the case to proceed fairly and should not be such that a party feels a license to litigate. • The proof of the necessity of interim disbursements would be critical to the successful claim. The claimant must clearly demonstrate that the disbursements are necessary and reasonable given the needs of the case and the funds available.

In particular, if an expert is the subject of a requested disbursement, the claimant must demonstrate there is a clear need for the services of said expert. • The claimant must demonstrate that he or she is incapable of funding the requested amounts. • The order for interim disbursements should not be limited to cases where it would be taken out of an equalisation payment. There are cases where there would not be an equalisation payment. [ 27 ] I find that the applicant has satisfied these criteria. The applicant’s claim is reasonable. She cannot afford the cost of the expert or the cost of counsel.

She cannot obtain legal aid. The respondent has substantial resources. The applicant cannot test the respondent’s income claims without the assistance of an expert. The respondent himself required the assistance of an expert to ascertain his income for child support purposes. [ 28 ] I do not accept the respondent’s submission that the issues are uncomplicated in this case. The respondent makes this argument from the vantage point of having retained a lawyer and an accountant. In my view, the legal and factual issues are complex. There is substantial financial disclosure.

Understanding the implications and the relevance of this material is beyond the capacities the applicant. She requires expert assistance to critique the conclusions of the respondent’s accountant, to assess the impact of the terms of sale of Sani on the respondent’s child support obligations, and to determine what is germane to her claim in the financial disclosure produced. She cannot do any of this on her own. Similarly, the applicant will be significantly disadvantaged without counsel. She would be unable to make the necessary legal arguments.

The child is ill, the mother is impecunious and the outcome is important. In the absence of counsel and the expert, the playing field will be exceedingly uneven. How can the court deal with the case justly in such circumstances? I am persuaded on a balance of probabilities that there should be an order for interim disbursements in the sum of $25,000. Released on: 27 June 2011 ………………………. Justice Marion L. Cohen