Decker v. Fedorsen, 2011 ONCJ 850

Toronto (North York) Registry No. D49476/09 DATE: 2011 XII 13 CITATION: Decker v. Fedorsen , 2011 ONCJ 850 ONTARIO COURT OF JUSTICE BETWEEN: REBECCA DECKER, Applicant — AND — JEREMIAH FEDORSEN, Respondent Before Justice Curtis Heard on 5 and 6 December 2011 Reasons for Judgment released on 13 December 2011 Rebecca Decker ............................................... on her own behalf Jeremiah Fedorsen ............................................ on his own behalf JUSTICE C. CURTIS: 1 . Overview 2 . Background 3 . Litigation History 4 . Support History 5 . Mr. Fedorsen’s income a. The Law Regarding Mr.

Fedorsen’s Income b. The Evidence Regarding Mr. Fedorsen’s Income c. The Decision regarding Mr. Fedorsen’s Income 6 . Spousal Support 7 .

Section 7 expenses 8 . Life Insurance 9 . Medical and Dental Benefits 10 . Representation of the Parties

11 . Orders For previous proceedings, see Decker v. Fedorsen , 2010 ONCJ 618 , [2010] O.J. No. 5661, 2010 Cars​well​Ont 9891 (Ont. C.J.), per Justice Stanley B. Sherr. Overview 1. This is the decision in a two day trial regarding Rebecca Decker’s application for child and spousal support. 2. Ms. Decker asked the court to impute income to Jeremiah Fedorsen, and to order child and time limited spousal support based on that income, starting at the date of separation in October 2008. 3. Mr.

Fedorsen acknowledges a child and spousal support obligation, asks the court to use a different income number than that proposed by Ms. Decker, and asks that the time limited spousal support be for a shorter period than that sought by Ms. Decker. Background 4. Rebecca Decker (the applicant, “Ms. Decker”) was 42 years old at trial. She is currently at Seneca College in a medical administration program to be completed in July 2012. 5. Jeremiah Fedorsen (the respondent, “Mr. Fedorsen”) was 38 years old at trial. He is a self-employed financial planner. 6.

The parties lived together for seven years, from February 2001 to October 2008. They were not married to each other. 7. There are no children of this relationship. However, the parties lived with Ms. Decker’s son Laurence (14 years old at trial), a child from a previous relationship. There is a child support order for $188 per month for Laurence’s father, which Ms. Decker says is not being paid. There was no issue at trial about eligibility for child support, as Mr. Fedorsen acknowledged that he is a parent of Laurence as defined in the Family Law Act, R.S.O. 1990, c. F-3, as amended (“ F.L.A. ”).

He agreed that he has a child support obligation for Laurence. Mr. Fedorsen also agreed that the table amount (rather than some other amount) of child support under the Child Support Guidelines, O. Reg. 391/97 , as amended, was appropriate for Laurence. Litigation History 8. Justice Stanley B. Sherr made a temporary order on 10 December 2010 for child and spousal support: a. Child support $1,158 per month from 1 December 2010, on imputed income of $137,143 per year; and, b. Spousal support $3,000 per month from 1 December 2010. 9. In arriving at an imputed income for Mr.

Fedorsen of $137,143 per year, Justice Sherr followed these steps (in a detailed written endorsement):

a) The court drew an adverse inference from Mr. Fedorsen’s failure to provide financial disclosure for 2010 and his inability to explain in any meaningful way how his income was calculated;

b) the gross revenue (before expenses) received by his corporation for 2007-2009 was:

2007 $248,444 2008 $227,864 2009 $177,393

c) The court accepted that 2009 was a very difficult year for his business, but found that business had rebounded in 2010;

d) In the absence of any current records from his business, the court fixed the current gross business income of the corporation at its 2008 level ($227,864);

e) The court found that Mr. Fedorsen and his accountant had aggressively deducted expenses to reduce his income for income tax purposes, and found that the expenses claimed in the corporate financial statements were not an accurate reflection of its actual expenses;

f) The court found that the corporate expenses should be no more than 50% of its gross revenue. This translates to Mr. Fedorsen actually earning an annual income of $113,932; and,

g) The court grossed up his income, as he was declaring and paying tax on substantially less income than he is actually earning, and to ensure consistency of treatment where a party is found to have arranged his affairs to pay less tax on income. A software analysis to gross-up the income brought his annual income to slightly over $137,143, the amount that the court imputed to him as income for support purposes. Support History 10. Mr. Fedorsen said that from separation in October 2008, he did everything he could to ensure that Ms. Decker and her son were being well taken care of.

He made payments to and on behalf of Ms. Decker and her son voluntarily, that is, without court order or agreement, from separation in 2008 onwards. 11. When the parties separated, Mr. Fedorsen moved out of the home, although it was a home owned by him, and he allowed Ms. Decker and her son to remain living there until they found other accommodation. This took a long time, and they lived in that house until July 2009. 12 . Mr. Fedorsen gave Ms.

Decker continued access to their joint bank account, and she continued to use the Visa card that he paid for, which had a $23,000 limit, and then later, a monthly limit of $1,300. Mr. Fedorsen agreed to guarantee her rent to a landlord so she would be able to rent a home. 13 . Mr. Fedorsen gave detailed evidence about the payments he had made to and on behalf of Ms. Decker and her son since separation. Ms. Decker did not dispute that these amounts were paid. He paid the following amounts: Year Total paid 2008 $14,985.50 2009 $56,730.47 2010 $42,779.96 Total $114,495.93 14 .

These payments over a twenty-six month period, average over $4,400 per month. All these payments were made out of after tax money, as there was no court order or agreement in place which would permit Mr. Fedorsen to deduct any payments made regarding spousal support.

15. Mr. Fedorsen had difficulty making these payments on the income he was earning from his business. In order to continue to makethese payments he cashed in some assets that he owned, including cashing his RSPs on several occasions as follows: YearWithdrawn2008$10,0002009$29,2122010$9,700Total$48,912 He remortgaged his house for $30,000 in December 2008, and later remortgaged it again. Mr. Fedorsen’s Income The Law Regarding Mr. Fedorsen’s Income 16. The primary issue regarding child support is Mr.

Fedorsen’s income, that is, not only what he is earning, but also, whether thereshould be income imputed to him for the purposes of child support. 17. Section 19(1) of the Child Support Guidelines, Ont. Reg. 391/97, as amended, addresses imputing income and reads as follows: 19. Imputing income. —

(1) The court may impute such amount of income to a parent or spouse as it considers appropriate in thecircumstances, which circumstances include, (

a) the parent or spouse is intentionally under-employed or unemployed, other than where the under-employment or unemployment isrequired by the needs of any child or by the reasonable educational or health needs of the parent or spouse; (

b) the parent or spouse is exempt from paying federal or provincial income tax; (

c) the parent or spouse lives in a country that has effective rates of income tax that are significantly lower than those in Canada; (

d) it appears that income has been diverted which would affect the level of child support to be determined under these guidelines; (

e) the parent's or spouse's property is not reasonably utilized to generate income; (

f) the parent or spouse has failed to provide income information when under a legal obligation to do so; (

g) the parent or spouse unreasonably deducts expenses from income; (

h) the parent or spouse derives a significant portion of income from dividends, capital gains or other sources that are taxed at a lowerrate than employment or business income or that are exempt from tax; and (

i) the parent or spouse is a beneficiary under a trust and is or will be in receipt of income or other benefits from the trust.

(2) Reasonableness of expenses. — For the purpose of clause (1)(g), the reasonableness of an expense deduction is not solely governedby whether the deduction is permitted under the Income Tax Act (Canada). 18. Imputing income is one method by which the court gives effect to the joint and ongoing obligation of parents to support theirchildren. In order to meet this obligation, the parties must earn what they are capable of earning. If they fail to do so, they will be foundto be intentionally under-employed. Clause 19(1)(

a) of the guidelines is perceived as being a test of reasonableness: Drygala v. Pauli,, 61 O.R. (3d) 711, 164 O.A.C. 241, 219 D.L.R. (4th) 319, 29 R.F.L. (5th) 293, [2002] O.J. No. 3731, 2002 Cars​well​-Ont 3228 (Ont. C.A.). 19. The test for imputing income for child support purposes applies equally for spousal support purposes: Rilli v. Rilli, , 151 A.C.W.S. (3d) 1130, [2006] O.J. No. 4142, 2006 Cars​well​Ont 6335 (Ont. Fam. Ct.); Perino v. Perino, ,46 R.F.L. (6th) 448, [2007] O.J. No. 4298, 2007 Cars​well​Ont 7171 (Ont. S.C.).

Section 19 of the Guidelines is not an invitation to the court to arbitrarily select an amount as imputed income. There must be arational basis underlying the selection of any such figure. The amount selected as an exercise of the court's discretion must be groundedin the evidence: Drygala v. Pauli, supra, para 44.

21. A self-employed person has the onus of clearly demonstrating the basis of his net income. This includes demonstrating that thedeductions from gross income should be taken into account in the calculation of income for support purposes: Whelan v. O’Connor,, 28 R.F.L. (6th) 433, [2006] O.J. No. 1660, [2006] O.T.C. 409, 2006 Cars​well​Ont 2581 (Ont. S.C.). This principlealso applies where the person's employment income is derived from a corporation that he fully controls: MacKenzie v. Flynn, 2010ONCJ 184, [2010] O.J. No. 2145, 2010 Cars​well​Ont 3450 (Ont. C.J.). The Evidence Regarding Mr. Fedorsen’s Income 22.

Mr. Fedorsen is a financial planner. He has been working in this field for sixteen years. He is the sole shareholder ofFedorsen Financial Inc., and through the corporation he sells London Life investment products exclusively. London Life pays thecommissions to the corporation. He is paid by one source, and he pays one employee, rent and the ordinary office expenses one wouldexpect from a small business. 23. Mr. Fedorsen says that his gross revenue (before expenses) for his business is shown on the Earnings

Summary statementsfrom London Life, as follows: YearAnnual Gross Revenue2008$227,8642009$177,393.912010$258,979.202011$176,319.99 (projected for 12 months) 24. Ms. Decker believes that Mr. Fedorsen earns more than he is telling the court. She believes that he has manipulated hisincome and his disclosure to the court to understate and misrepresent his income. 25. Ms. Decker believes Mr. Fedorsen is understating his income in at least two different ways. She believes that he earns moremoney than the amounts shown as the corporation’s gross revenues on the earnings statements from London Life.

She also believes thathe overstates his expenses for tax purposes in ways which should not be accepted as expenses for child support purposes, that is, thatcertain amounts should be added to his income for determining his income for child support purposes, in accordance with s. 19(2) ChildSupport Guidelines. 26. Ms. Decker asked that the court impute income to him of $178,000 per year. She arrived at the figure of $178,000 as theimputed income as follows: she chose different gross revenues numbers (different than the numbers Mr.

Fedorsen relied on) for the threeyear period 2008, 2009, 2010, averaged them (as in s. 17 Child Support Guidelines), and reduced the gross revenues average amount by25%, for what she says are reasonable expenses. 27. Although Mr. Fedorsen’s income tax returns in 2008 and 2009 showed actual losses for those years, he was clearly earningmoney in those years, as is evidenced by the generous levels of child and spousal support he was paying voluntarily. 28. The financial statements prepared for Mr.

Fedorsen’s income tax returns were not helpful to the court in determining hisincome for child support purposes, and were not relied on. They set out his income for tax purposes, and showed, as Justice Sherr found,that he and his accountant had “aggressively deducted expenses to reduce his income for tax purposes”, and that “the expenses claimedin the corporate financial statements were not an accurate reflection of its actual expenses”. The Decision regarding Mr. Fedorsen’s Income 29.

Determining the income for support purposes of a self-employed person whose income varies substantially from year to yearis not a science. It involves an analysis and weighing of the evidence presented, an application of the relevant legal principles, andultimately, the exercise of the court’s discretion.

30 . Mr. Fedorsen said that the income amount imputed by Justice Sherr, for temporary support purposes, $137,143 per year, was high, and that he earns less than that, but that it was a reasonable amount, that he was agreeable to that amount, and he proposed this amount be used for support purposes. There was no evidence at the trial that substantially changed the information provided to Justice Sherr at the temporary motion on which he based his calculation of $137,143 as the imputed income.

The gross revenue numbers for 2010 and 2011 were not available for Justice Sherr but were available at trial ($258,979.20 for 2010, and $176,319.99 projected for 2011). The formula approach used by Justice Sherr was a reasonable one for a self-employed payor, particularly one whose income varies from year-to-year.

Using a similar formula to that used by Justice Sherr, but averaging the previous three years of gross revenues (2009, 2010, 2011), then deducting 50% for expenses (leaving an after expense income of $113,932 by Justice Sherr, and $102,115 in this scenario), and then grossing up the amount, would result in an income amount slightly lower than that Justice Sherr relied on. Mr. Fedorsen felt that the number used by Justice Sherr was acceptable and reasonable, and so does the court. 31 .

The table amount of child support for one child under the child support guidelines based on an annual income of $137,143 is $1,158 per month. Spousal Support 32 . There was no issue as to entitlement of spousal support in this matter. The issues regarding spousal support were duration, amount and Mr. Fedorsen’s income for support purposes. 33 . Ms. Decker did not work outside the home during the relationship and has not worked since 2001. She had a grade 9 education, and worked as a waitress before the relationship. She currently has no income other than what she receives from Mr. Fedorsen. 34 . Ms.

Decker delayed her start on the road to re-train and to upgrade her education. She said that she was quite occupied after the separation with litigation brought by her son’s father, which had her tied up and in court often in 2008 and 2009. She tried to get some GED credits but needed extra help in math. She started her current program in May 2011. 35 . Ms. Decker claims spousal support for herself until 2014 or 2015, that is, spousal support for 6 to 7 years from separation. Mr.

Fedorsen has paid spousal support since separation, and is willing to continue to pay spousal support, but says that it should stop in December 2012 (4 years after separation). 36 . Ms. Decker has not worked at all in the three years since separation. This is concerning, particularly as this was addressed clearly and specifically one year ago, in the endorsement of Justice Sherr regarding the temporary spousal support order.

The principles of imputing income apply equally to the support claimant if she is intentionally under-employed, unless it is by virtue of her reasonable educational needs, the needs of the child or reasonable health needs: Drygala v. Pauli , supra . There was no evidence that Ms. Decker could not work, and she did not take the position that she could not work, not for those reasons, or for any other reasons. 37 . Justice Sherr found in December 2010 that Ms. Decker was intentionally under-employed without reasonable explanation and that income should be imputed to her.

Justice Sherr imputed $12,000 per year income to her. 38 . Ms. Decker is now a full-time student, set to complete her course in July 2012. She plans to work in the medical administration field when she completes her course. However, she could not tell the court what she expected to earn in this job. She could not even provide an estimate, or a minimum, or a range of salary. She is not planning for her future as she should be at this age and stage of her life. 39 . If Ms. Decker were not in school, the court would have imputed at least minimum wage income of $21,300.

As she is currently in school, the court will impute a part-time wage of $12,000. 40 . Ms. Decker’s claim for 6 to 7 years of post-separation spousal support would put her support at the far outside range for a seven year relationship. She was 39 years old at separation. She needs an opportunity to re-train and get back into the work force, and Mr. Fedorsen, so far, has been affording her that. It is regrettable that she has not worked at all since separation, and that she really only began re-training in May 2011. She has not used the first three years since separation wisely, or to her benefit.

She has been supported by Mr. Fedorsen since separation, particularly generously in the first two years, during which there were no tax consequences for her for the money she received. A reasonable period of time for spousal support for a relationship of this duration, and given her age and all other factors, would be 5 years from separation. Mr. Fedorsen shall pay spousal support until the end of December 2013.

41 . Mr. Fedorsen offered to pay the income tax Ms. Decker might incur if the spousal support were to start earlier than the date chosen by Justice Sherr (1 December 2010). That is a reasonable proposal, and Ms. Decker did not oppose it. In 2010 Mr. Fedorsen paid $42,779.96 for spousal support and child support. If this amount is reduced by a reasonable amount for child support (e.g., $1,158 per month x 11 months = $12,738 for child support for 2010), he has paid the equivalent of $30,041.96 (or $2,731.09 per month) in spousal support in 2010, before Justice Sherr’s order was made.

Spousal support shall start on 1 January 2010, with credit to Mr. Fedorsen for the amounts paid, that is, from 1 January 2010, Mr. Fedorsen shall pay spousal support of $2,731.09 per month. He shall be credited with paying this amount in full ($2,731.09 per month) from 1 January 2010 to 30 November 2010. There are no arrears of spousal support owing as of 30 November 2010. As well, there are no arrears of child support owing as of 30 November 2010. 42 . There will be no deduction from or reduction to or termination of spousal support when Ms. Decker gets employment.

Spousal support shall continue until 31 December 2013. This will allow Ms. Decker to get firmly and confidently established and on her feet, which is where she needs to be. It will operate as an incentive to her to get full-time employment as soon as possible, as this will not affect her entitlement to spousal support nor the amount she receives. Working as soon as possible will also allow her to maximize the period of time with this additional income. And it may allow her to save some of this income to pay for expenses which she has. 43 . Justice Sherr ordered Mr.

Fedorsen to pay $3,000 per month spousal support from 1 December 2010. The court used income of $137,134 and looked to the range of spousal support set out in the Spousal Support Advisory Guidelines. The guidelines are not mandatory and are not law. However, as Justice Sherr noted, the guidelines, while only advisory, are a useful starting point to assess the quantum of spousal support, once entitlement is established: Fisher v. Fisher , 2008 ONCA 11 , 88 O.R. (3d) 241, 232 O.A.C. 213, 288 D.L.R. (4th) 513, 47 R.F.L. (6th) 235, [2008] O.J. No. 38, 2008 Cars​well​Ont 43 (Ont. C.A.). 44 .

The range of spousal support in the guidelines for this level of income (taking into consideration the income imputed to Ms. Decker of $12,000 per year and the child support of $1,158 per month) is as follows: Low range $2,692 per month Mid-range $3,096 per month High range $3,489 per month 45 . Justice Sherr chose the mid-range amount for several reasons:

a) This amount (with the child support and the income imputed to Ms. Decker) results in Ms. Decker and the child with slightly more than 50% of the family’s net disposable income; and,

b) This is a reasonable distribution given the length of the relationship, the needs of the parties and the comfortable lifestyle they and the child enjoyed while they lived together. 46 . There is no evidence to suggest this amount is not a suitable amount for final spousal support. Neither party asked the court to order a different amount of spousal support. 47 . Mr. Fedorsen shall pay the Ms. Decker $3,000 per month for spousal support from 1 December 2010 until and including 1 December 2013. These payments are deductible from income for tax purposes for Mr. Fedorsen and are income for tax purposes for Ms.

Decker. 48 . Ms. Decker claims a separate category of spousal support payment for dental work she says she needs to have done. She produced a statement from her dentist itemizing this work and projecting a cost of over $94,000 for this work. Ms. Decker asked for a lump sum to cover the entire cost of this work. No alternative quotes were offered, so it was not possible for the court to know if that large quote was a reasonable quote for the work needed. There was no evidence provided as to whether this work was necessary, other than Ms. Decker‘s bald statement that it was. Mr.

Fedorsen is self-employed, and does not have a benefits plan available to cover this work. 49 . This is an unreasonable claim. Ms. Decker has not gone to the dentist for even the modest maintenance of teeth cleaning in the three years since separation. This family could not have afforded an expense of this magnitude even while living together. Dental

expenses should be paid by Ms. Decker out of the monthly spousal support payments that she receives. She can perhaps find a more reasonable price for this work, and should negotiate a payment plan with the dentist. She should also keep this need in mind when looking for a job, to ensure that her employment benefits cover as much of this work as possible. There will be no order for Mr. Fedorsen to contribute to the cost of this work. This claim is dismissed.

Section 7 expenses 50 . Ms. Decker made claims for several s. 7 expenses (summer camp, hockey, art sessions, and dentist). She did not present invoices at trial for the cost of these expenses although she itemized the monthly costs for each: Summer camp $24 Hockey $60 Art sessions $55 Dentist $50 51 . She admitted that these expenses were not currently being incurred. For example, Laurence had not participated in hockey for several years. It appeared as though this was her wish list for activities for Laurence. 52 . Mr. Fedorsen agreed that he should contribute to the reasonable s. 7 expenses for Laurence. 53 .

However, as there are currently no s. 7 expenses this claim is dismissed. 54 . If Ms. Decker incurs s. 7 expenses in future, and the parties cannot agree on the amount of the contribution, one of them may return the matter to court for a determination. Life Insurance 55 . Ms. Decker claimed an order under s. 34(1) (

i) F.L.A. requiring Mr. Fedorsen to designate her as beneficiary under a policy of life insurance to life insure the child and spousal support obligation. That

section requires the payor to have an existing policy of life insurance. There was no evidence that Mr. Fedorsen had such a policy. This claim is dismissed. Medical and Dental Benefits 56 . Ms. Decker claimed an order under s. 34(1) (

j) F.L.A. requiring Mr. Fedorsen to designate her and Laurence as beneficiaries under his benefits plan for medical and dental benefits. That

section requires the payor to have an existing interest in a benefits plan. As a self-employed person, Mr. Fedorsen does not have such benefits. This claim is dismissed. Representation of the Parties 57 . Neither party was represented by a lawyer at the trial. It is regrettable that the parties were unrepresented. This resulted in the evidence being presented in a less than comprehensive fashion, particularly on financial issues. Both parties would have benefitted greatly from the assistance and advice of a competent family law lawyer. Orders 58 . Mr. Fedorsen shall pay child support as follows:

a) on imputed income of $137,134, child support table amount of $1,158 per month from 1 December 2010;

b) There are no arrears of child support owing as of 30 November 2010; and,

c) Mr. Fedorsen shall produce to Ms. Decker every year by 1 June, starting in 2012, copies of his Income Tax returns and Notices of Assessment, pursuant to ss. 24.1, 25 and the disclosure requirements of the Child Support Guidelines . 59 . Mr. Fedorsen shall pay spousal support to Ms. Decker as follows:

a) on imputed income of $137,143, from 1 January 2010, $2,731.09 per month;

b) He shall be credited with paying the total amount of $30,041.96 from 1 January 2010 to 30 November 2010;

c) On consent, Mr. Fedorsen shall pay any additional income tax that may be reassessed to Ms. Decker for the calendar year 2010 as a result of this order. Both parties shall re-file their income tax returns for that year, to be arranged by Mr. Fedorsen and to be done at his expense;

d) There are no arrears of spousal support owing as of 30 November 2010;

e) on imputed income of $137,143, from 1 December 2010, $3,000 per month until 31 December 2013 (the final payment is 1 December 2013);

f) there shall be no reduction, deduction or termination of spousal support when Ms. Decker obtains work; and,

g) Ms. Decker’s claim for a lump sum spousal support for dental expenses is dismissed. Released: 13 December 2011 ________________________________ Justice Carole Curtis