Dickey v. Morell, 2011 ONCJ 707

Milton Registry No. 369/08 DATE: 2011.IX.23 CITATION: Dickey v. Morell , 2011 ONCJ 707 ONTARIO COURT OF JUSTICE BETWEEN: KIMBERLEY ANNE DICKEY Applicant — AND — DALE JOSEPH MORREL Respondent Before Justice Sheilagh O’Connell Heard on April 18, 19, 20 21, 2011 Reasons for Judgment released on September 23, 2011 Reginald M. McLean .................................................................................. for the applicant George B.

Callahan ................................................................................. for the respondent O’CONNELL, J.: 1: INTRODUCTION: [ 1 ] The applicant, Kimberley Anne Dickey, commenced an application on September 16, 2008 seeking custody, a restraining order, child support, spousal support and an order that the child support and spousal support payments be made retroactive to August of 2007.

The respondent, Dale Joseph Morrell responded and brought his own claims for joint custody, specified access and a restraining order. [ 2 ] The parties settled the custody and access issues before the commencement of trial, so the only issues before me were the mother’s claims for child and spousal support. 2: ISSUES BEFORE THE COURT: [ 3 ] The issues for me to decide are the following:

a) What is the father’s income?

b) What is the mother’s income?

c) Should income be imputed to either party?

d) What child support should be payable for the child of the relationship?

e) Is the mother entitled to spousal support, does the father have the ability to pay spousal support, and if so, what should the quantum and duration of spousal support be?

f) Is the mother entitled to retroactive child and spousal support? 3: APPLICANT’S POSITION: [ 4 ] At the commencement of trial, the mother submitted that the father’s true annual income is between $80,000.00 and $100,000.00 and that he is either intentionally underemployed or hiding his income. She submits that child support should be paid at a

rate of $800.00 per month, retroactive to September 2008, less the child support already paid since that time in the amount of $10,720.00. She further submits that she is entitled to spousal support, that the father has the ability to pay spousal support, and that spousal support should be made payable at a rate of $500.00 per month, also retroactive to September 1, 2008. 4: RESPONDENT’S POSITION: [ 5 ] The father submits that his actual annual income is $10,000.00 but he is prepared to concede that income should be attributed to him in the range of $30,000.00 to $33,000.00 annually.

He submits that he will continue to pay child support in the amount of $300.00 per month, based on an imputed income of $33,000.00. He submits that the mother is not entitled to spousal support because she earns more than him, and further, that he does not have the means to pay spousal support. He also states that the mother has the benefit of living in the parties’ former family residence and receives significant rental income from this property.

At trial, the father estimated that the mother’s total income from all sources could be as high as $56,000.00. 5: BACKGROUND: [ 6 ] The parties were in a common-law relationship for ten years. The mother is 44 years old and the father is 40 years old. They began living together in 1997 and separated in 2007. Both parties agree that the father moved into the mother’s home in Port Credit, which she owned mortgage-free.

That home was subsequently sold and the parties purchased another home in Mississauga approximately one year later from the sale proceeds of the mother’s first home and a mortgage that they both co-signed. The father was placed on title to the second home. They sold that home in 2005 for a profit and purchased the last family home with the net sale proceeds, a new mortgage, and a $100,000.00 loan from the applicant’s mother. [ 7 ] There is one child of the relationship, Kyle Evan Morrell, born November 23, 1998 (“Kyle”). Kyle is now 12 years old.

The mother states that the parties separated in January of 2007, however, they continued to live separate and apart in the family home. The father states that they separated in June of 2007, although agrees that they continued to live separate and apart in the family home until August of 2007. [ 8 ] In August of 2007, the father was arrested and removed from the family home. He was charged with assault and uttering threats against the mother. The father denies that he assaulted and threatened the mother and states that the mother falsely accused him to force him from the family home.

On October 30, 2007, the father pleaded guilty to the charge of uttering threats and received a conditional discharge and twelve months probation. One of the terms of probation was to complete anger management counselling through the PARS program. The father states that he pled guilty upon the advice of duty counsel only and that he did not threaten the mother. [ 9 ] Both parties agree that they have not spoken to each other since the August 2007 incident, a period of more than four years. They communicate through text messaging, e-mail or counsel only.

Both parties filed voluminous e-mail and text correspondence as part of their document briefs at trial. [ 10 ] Throughout most of their relationship, the parties owned and operated a delivery and courier company called Fast Forward Freight Inc. This company was started in 1999, became incorporated in 2000, with a $50,000.00 line of credit secured by the applicant’s mother. Even after the parties separated in 2007, they continued to operate the business together.

However, after the father left the home in August of 2007, the mother transferred her ownership in the business to the father in November of 2007, in exchange for the father transferring his ownership in the family home to the mother. [ 11 ] The mother gave evidence that at its height, Fast Forward Freight was very successful and that the parties earned a minimum of $100,000.00 per annum from the business.

They enjoyed a good standard of living. [ 12 ] The father testified that he became addicted to gambling during his relationship with the mother and that this became a very serious problem, particularly towards the end. He testified that the worst time for him was the fall of 2007, when he gambled and drank heavily, took expensive trips and suffered from depression.

The father states that after seeking psychiatric treatment for his gambling and depression, taking prescribed medication and undergoing the PARS program, he is now a changed person. [ 13 ] Both parties agreed that after the separation, they reached an agreement in which the father would transfer his interest in the family home to the mother in exchange for her transfer of interest in the business to the father. However, the mother states that the parties agreed that she would pay the father the sum of $30,000.00 once the family home sold.

The father states that the parties agreed that the mother would pay him $50,000.00 from the sale proceeds. [ 14 ] In November of 2007, the mother started her own company called Kaye Logistics shortly after the mother transferred her interest in Fast Forward Freight to the father. Kaye Logistics is also a courier and delivery company and the father states that the mother stole many of his major clients from him when establishing her own business.

The mother states that she only kept the clients that she was directly involved with, and that the father agreed that she could keep these clients. [ 15 ] In January of 2008, the father claimed bankruptcy and started a new business called Dale Cartage. Dale Cartage is also a courier and delivery company, operating in a similar manner as Fast Forward Freight. The father states that he was forced to file for bankruptcy in January of 2008 due to the insurmountable debt that had accumulated in his former business.

He states that after he was removed from the family home, the mother refused to provide him with the computer and business records, thereby making it impossible to pay the business expenses and debt. He states that the mother kept all of the business records until December of 2007, and by that time, “the business was done.” The mother denies this and states that she delivered all of the father’s business records to him in the fall of 2007. He further states that she refused to pay him the $50,000.00 which he claimed that they had agreed upon in the property settlement so he was unable to pay the company debt.

[ 16 ] As a result of the father’s bankruptcy, the mother states that the father left her with all of the business debt from Fast Forward Freight, in excess of $100,000.00, and that she was pursued by the father’s trustee in bankruptcy to sell the family home to pay off the father’s creditors. The mother retained counsel and eventually entered into a Consumer Proposal wherein she agreed to pay approximately $120,000.00 owing in company debt to the Trustee at the rate of $1,000.00 per month. The mother refinanced the family home, obtained rental income and a loan from her mother to satisfy this proposal.

The mother also filed a Proof of Claim against the father in the bankruptcy proceedings, claiming the amount of $37,787.84 as the debt that she paid towards the father’s business and personal debt before she entered into the Consumer Proposal. [ 17 ] On August 21, 2008, the mother filed an opposition to the father’s discharge from bankruptcy.

She stated that the father had not disclosed all of his assets and income to the trustee in bankruptcy at the time of his assignment, continued to operate Fast Forward Freight, incurred post-bankruptcy debt, and that he had incurred a large amount of travel and gambling debt (approximately $24,000.00) shortly before his bankruptcy.

The mother also advised the trustee that the father had not disclosed his true income from Dale Cartage, as well as the existence of two bank accounts containing a considerable balance of funds, and that he had not disclosed a post bankruptcy loan in the amount of $50,000.00 from Ms Fortier’s father. [ 18 ] As a result of the mother’s opposition, the trustee in bankruptcy conducted a further investigation prior to discharging the father from bankruptcy.

On October 19, 2009, the trustee issued a supplementary report and concluded that the father had not reported all of his assets on his Statement of Affairs and that in the six month period prior to bankruptcy, he incurred at least $24,000.00 in debt as a result of travel and gambling. The trustee was also of the opinion that the father had not disclosed to the trustee all of his current income as well as other possible household income.

The trustee therefore requested that the father provide any and all records for his personal and business activities from the year prior to bankruptcy to present, as well as a number of other undertakings prior to discharge. In December of 2010, the father testified before the Official Examiner in the bankruptcy proceedings. A discharge hearing was scheduled to proceed some time after the conclusion of this trial and the court is unaware of the outcome of that hearing. [ 19 ] The mother states that she did not sell the family home because she was not getting any offers and she could not sell the house.

She further states that she never paid the $30,000.00 to the father because there was no clear direction when she should pay this amount, and that the father left her with a debt over $120,000.00 in addition to all of the family and business expenses. [ 20 ] Both parties agree that the father made voluntary child support payments in the amount of $400.00 per month to the mother after he left the family home in August of 2007. In October of 2009, the father reduced these payments to $300.00 per month. [ 21 ] The father started a new relationship with Ms Melanie Fortier in the summer of 2007.

The father moved into Ms Fortier’s home in October of 2007. They have cohabited since that time and were married in January of 2011. They have one child together and are expecting a second child in September of this year. [ 22 ] After the father and Ms Fortier started living together, Ms Fortier sold her home and purchased a new home with the sale proceeds and with some financial assistance from her parents. She and the father lived together in that home as well.

That home has recently been sold and Ms Fortier and the father have purchased a new home, again with the assistance of Ms Fortier’s parents and the sale proceeds of the former home. Ms Fortier and her parents are on legal title to the new home. The father is not on title, although since his marriage to Ms Fortier it is now the matrimonial home. [ 23 ] The father operates his business, Dale Cartage, from the new home that he shares with Ms Fortier.

The father-in-law gave evidence at trial that the father’s new courier business is “doing fairly well.” The father also testified that the business is “growing” and that he anticipates it will generate the income to meet his expenses and to repay his father-in-law. The father testified that he has secured a major client which will generate significant income. [ 24 ] The mother continues to live in the former family home with Kyle. The mother also operates her business, Kaye Logistics, from this home.

She has one tenant in the basement apartment from which she receives $1,100.00 per month in rent. [ 25 ] The mother commenced her application for custody, support and restraining relief in September of 2008. On March 2, 2009, the parties reached final minutes of settlement resolving the custody and access issues. The final minutes provide that the mother shall have custody of Kyle and the father shall have alternating weekend access and every Wednesday after school, along with the usual holiday access, and other incidents of custody and access.

The trial management conference regarding this trial was adjourned on several occasions between March of 2009 and May of 2010 because of outstanding disclosures issues that had not been resolved between the parties. The trial management conference was eventually completed in August 2010. 7: THE LAW AND ANALYSIS: 7.1 Determination of Income: [ 26 ]

Section 16 of the Child Support Guidelines, O. Reg. 391/97, as amended, provides that a parent’s or spouse’s annual income is determined using the sources of income set out under the heading “Total Income” in the T1 General form issued by the Canada Revenue Agency and is adjusted in accordance with

Schedule 111 of the Guidelines.

Section 16 is silent regarding whether this determination is based on the parent’s annual income in the past taxation year, the estimated annual income of the current year, or an estimate of probable future income. However, s. 2(3) of the Guidelines provides that, “[w]here, for the purposes of these Guidelines , any amount is determined on the basis of specified information, the most current information must be used.” [ 27 ] In Lavergne v. Lavergne , 2007 ABCA 169 , 409 A.R. 57, 76 Alta. L.R. (4th) 47, 402 W.A.C. 57, 283 D.L.R. (4th) 390, 40 R.F.L. (6th) 239, [2007] A.J.

No. 580, 2007 Cars​well​Alta 690, the Alberta Court of Appeal stated the following regarding the period in which the determination of annual income should be made:

“[17] Looking at the words of the Guidelines in context indicates that, in most circumstances, the payor's current income is to be used todetermine the amount of child support. The Guidelines do not state that the past year's income is the basis for calculating support.Section 16 could have, but does not, define annual income as income stated on the previous year's income tax return.

Section 16 shouldbe read together with s. 2(3) of the Guidelines which provides (emphasis added):

(3) Most current information. -- Where, for the purpose of these guidelines, any amount is determined on the basis of specifiedinformation, the most current information must be used. [18] Reading s. 16 with s. 2(3) directs that, for the Guidelines, the most current information about those sources must be used. A courtfollowing this directive would end up with an estimate of the payor's current annual income.” [28]

Section 16 of the Guidelines is subject to sections 17 to 20 of the Guidelines.

Section 17 provides that where

section 16 isnot a fair means to determine levels of support, income can be calculated by looking at the income over that past three years to determine“an amount that is fair and reasonable in light of any pattern of income, fluctuation in income or receipt of a non-recurring amount duringthose years.” However, the averaging approach has been rejected in cases where the historical information is not likely to be an accuratepredictor of future income. See Dickie v. Dickie, (ON SC), 17 R.F.L. (5th) 304 (Ont. S.C.) and Tauber v. Tauber,(2001), (ON SC), 203 D.L.R. (4th) 168, 18 R.F.L. (5th) 384, [2001] O.J.

No. 3259, [2001] O.T.C. 625, 2001 Cars​-well​Ont 2842 (Ont. S.C.). [29] A self-employed person clearly has the onus of demonstrating the basis of his or her net income for child supportpurposes. This includes demonstrating that the business deductions from gross income should not be taken into account in thecalculation of income for support purposes. See Whelan v. O'Connor, , 28 R.F.L. (6th) 433, [2006] O.J. No. 1660,2006 CarswellOnt 2581 (Ont. Fam.

Ct.). [30] It is also well established in the case law that the self-employed person has an obligation to put forward adequate andcomprehensive records of income and expenses, so that a proper determination of the amount of child support can be established. Theonus rests on the parent seeking to deduct expenses from income to provide meaningful documentation supporting those deductions,failing which an adverse inference can be drawn. See Meade v. Meade, , 31 R.F.L. (5th) 88, [2002] O.J. No. 3155,2002 Cars​well​Ont 2670 (Ont. S.C.) and Orser v. Grant (2000), 96 A.C.W.S. (3d) 644, [2000] O.J.

No. 1429, 2000 Cars​well​Ont 1354(Ont. S.C.). As Justice Frances P. Kitely summarized in Meade v. Meade, supra,: “[81] It is inherent in the circumstances of those who are self-employed or who have irregular income and expenses, that they have apositive obligation to put forward not only adequate, but comprehensive records of income and expenses. That does not mean auditedstatements. But it does mean a package from which the recipient spouse can draw conclusions and the amount of child support can beestablished.

Where disclosure is inadequate and inferences are to be drawn, they should be favourable to the spouse who is confrontedwith the challenge of making sense out of financial disclosure, and against the spouse whose records are so inadequate or whose responseto the obligation to produce is so unhelpful that cumbersome calculations and intensive and costly investigations or examinations arenecessary.” 7.2 Imputing Income: [31]

Section 19 of the guidelines 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 the circumstances, whichcircumstances 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). [32] The leading case in Ontario is 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.). In this case, the Ontario Court of Appeal made itclear that it is not necessary for a court to find that a parent has acted in bad faith before it has the discretion to impute income. The word“intentionally” used in

section 19 means “voluntarily.” In other words, the court need not find that a parent is deliberately intending to

evade his support obligations before income can be imputed. Parties must earn what they are capable of earning. If they fail to do so,they will be found to be intentionally under-employed. [33] The onus is on the party seeking to impute income to the other party to establish that the other party is intentionally orvoluntarily unemployed or under-employed. The party requesting that income be imputed must establish an evidentiary basis uponwhich this finding can be made. Once that onus has been met, the onus shifts to the other party to establish a valid reason for his underor unemployment.

Section 19 specifically refers to valid reasons for under or unemployment as including child care requirements,reasonable health needs or reasonable educational needs. See Drygali v. Paul, supra. [34] In Duffy v. Duffy, 2009 NLCA 48, 289 Nfld. & P.E.I.R. 132, 890 A.P.R. 132, 73 R.F.L. (6th) 233, [2009] N.J. No. 245, 2009Cars​well​Nfld 211, the Newfoundland Court of Appeal summarized the general principles governing the issue of imputing income forchild support purposes: 1. The fundamental obligation of a parent to support his or her children takes precedence over the parent's own interests and choices. 2.

A parent will not be permitted to knowingly avoid or diminish, and may not choose to ignore, his or her obligation to support his orher children. 3. A parent is required to act responsibly when making financial decisions that may affect the level of child support available from thatparent. 4. Imputing income to a parent on the basis that the parent is "intentionally under-employed or unemployed" does not incorporate arequirement for proof of bad faith. "Intentionally" in this context clarifies that the provision does not apply to situations beyond theparent's control. 5.

The determination to impute income is discretionary, as the court considers appropriate in the circumstances. 6. Where a parent is intentionally under-employed or unemployed, the court may exercise its discretion not to impute income where thatparent establishes the reasonableness of his or her decision. 7. A parent will not be excused from his or her child support obligations in furtherance of unrealistic or unproductive career aspirationsor interests.

Nor will it be acceptable for a parent to choose to work for future rewards to the detriment of the present needs of his or herchildren, unless the parent establishes the reasonableness of his or her course of action. 8. A parent must provide proper and full disclosure of financial information. Failure to do so may result in the court drawing an adverseinference and imputing income. [35] The test for imputing income for child support purposes applies equally for spousal support purposes. See Rilli v. Rilli, , 151 A.C.W.S. (3d) 1130, [2006] O.J. No. 4142, 2006 CarswellOnt 6335 (Ont. Fam. Ct.); Perino v.

Perino, , 46 R.F.L. (6th) 448, [2007] O.J. No. 4298, 2007 CarswellOnt 7171 (Ont. S.C.). 7.3: Determination of the Father’s Income: [36] I find that the father’s income for child support purposes is $83,699.00 per annum based on the following evidence andanalysis: 1) The father’s most recent sworn financial statement, dated October 27, 2010 and prepared with the assistance of counsel,deposes that his monthly 2010 self-employment income after expenses is $4,119.22 or $49,430.64 per annum.

Yet throughout the trialthe father insisted his actual income was approximately $10,000.00 with no explanation for the discrepancy between these two figures. 2) In reviewing the father’s sworn financial statement, sworn almost 12 months ago, it is also evident than the father hasbeen able to maintain expenditures totalling $59,697.00 annually without incurring a corresponding debt. The father also gave evidenceunder oath to the Official Examiner that his monthly operating expenses were approximately $49,000.00 per annum.

Further, undercross-examination in this trial, the father admitted that in addition to those expenses, there were additional family expenses ofapproximately $650.00 monthly towards Ms. Fortier’s BMW, $850.00 monthly toward loan payments for his father-in-law, and $398.00monthly towards the financing costs for his vehicle, a Dodge Journey. This is a total of $7,000.00 monthly or $84,000.00 annually inpersonal expenditures.

The father offered no evidence as to how he paid these annual expenses on an income of $10,736.00, except tosay, for the first time at trial, that he received a $30,000.00 line of credit from his father in law. The father also gave evidence that hereceived a loan of $50,000.00 from his father-in-law in 2008 to assist with the start up of his new business. 3) When confronted with the discrepancy between his income and expenses, the father stated that he and Ms. Fortier are“behind on everything,” yet offered no evidence of an increasing debt load for the past twelve months to cover these expenses.

Thefather has one credit card, which he states is like “a prepaid debit card” that has a limit of $500.00. The father did not produce any creditcard statements at trial or any evidence that he and Ms Fortier are living significantly beyond their means. It is difficult to understandhow that father could be operating on a monthly deficit of more than $6,000.00 each month, over such a lengthy period of time with nocorresponding debt.

4) If I accept the father’s evidence that Ms. Fortier contributes approximately $8,000.00 annually towards the householdexpenses (although this was a “guesstimate” according to the father’s evidence, with no supporting documentation to support his figure),the father’s spending pattern of $76,000.00 annually ($84,000.00 minus Ms. Fortier’s contribution of $8,000.00) means that he has atleast another $65,264.00 annually available to him that he has not declared (declared income of $10,736.00 plus $65,264.00 inundeclared income equals $76,000.00).

However, I will accept that the father has relied upon a portion of the father-in-law’s non-recurring gift of $30,000.00 towards household expenses (although no evidence was provided to support this.) I am prepared to deductat least $15,000.00 from the father’s undeclared income because I do not consider the father-in-law’s gift to be income for child supportpurposes.

Therefore, I find that the father has at least $50,264.00 in undeclared income. 5) The case law is clear that where, as here, a parent arranges his or her affairs to pay substantially less tax on income, theincome must be grossed up before the table is applied. This is the only way to ensure the consistency mandated by the legislation. SeeSarafinchin v. Sarafinchin, (ON SC), [2000], O.J. No. 2855. The Divorcemate automatic gross-up calculationindicates that an additional $72,963.00 should be added to the father’s income for gross-up purposes.

After the gross-up calculation, thefather’s annual income for child and spousal support purposes is therefore $83,699.00. 6) In addition to the above, on the basis of the evidence filed, I do not find that the total expenses deducted from the father’sgross business income to be entirely business related expenses. The father’s financial disclosure, as a self-employed person, waswoefully inadequate. He provided the bare minimum of the disclosure necessary to determine his income for 2009. For 2010 and 2011,his disclosure was not sufficient. 7) Pursuant to Section 19(1)(

f) of the Child Support Guidelines, where a spouse fails to provide information where under alegal obligation to do so, the court may impute income to that person. Further, section 19(2) provides that where a spouse hasunreasonably deducted expenses from income, the reasonableness of the expense is not solely governed by whether the deduction ispermitted under the Income Tax Act. The father failed to provide the necessary supporting documentation for the Court to test hisassertion that the business expenses he deducted from his gross income were reasonable and legitimate.

For example, for his 2009income, as set out in line 150 of his 2009 income tax return, the father declared that his gross annual business income was $136,464.64,and that his total net income at line 150 for child support purposes was $10,735.53. However, in reviewing the business expensesdeducted in the Statement of Professional Activities attached to the income tax return, the father provides no supporting documentationat all demonstrating: (1) that the expense was actually incurred; (2) that the expense was “reasonably incurred under the Guidelines”.

The father incurred expenses totally $30,704.13 for car expenses, telephone and cell phone expenses, and meal and entertainment in2009. He incurred $31,093.83 for the same expenses in 2010, without any supporting documentation or evidence, (including businessgeneral ledgers, credit card statements, vehicle logs, appointment books, receipts), demonstrating how the personal versus the businessportion of these expenses was actually determined.

In 2009, the father also deducted $5,880.14 as a “business use of home expense”from his share of the personal housing expenses, again without any supporting documentation to demonstrate how he arrived atdeducting this amount from his home office, although it appears to be 30 percent of the father’s total personal housing expenses(mortgage, utilities and property taxes on the matrimonial home). 8) The father has also split his 2009 net business income of $33,231.34 with his current wife, Ms. Fortier, who is a jointowner of Dale Cartage.

However, there is no evidence that she provides other than minimal assistance with the company. Ms. Fortier isemployed part-time as a bartender, she is also the primary caregiver of their first child and she is expecting a new baby shortly. In myview, the evidence is clear that this is a form of income splitting that reduces the father’s income by an additional $16,615.67.

That isincome which should be attributed to the father. 9) For 2008 and 2010, no income tax returns or complete financial statements were provided and no back up documentationfor the determination of net business income for 2010 and business expenses claimed were provided. The father is an experiencedbusiness person who has been running his own business since 1998. He employs an accountant, presumably to maintain his books, taxreturns and financial statements.

I do not understand why better disclosure was not forthcoming. 10) Despite the father’s assertion that his income is only $10,000.00 per annum, he is prepared to pay child support in theamount of $300.00 per month. According to the Child Support Guidelines, this amount would be based on an income of $33,000.00. Healso testified that he purchases additional clothing, shoes and gifts for Kyle in the amount of approximately $100.00 per month for a totalof $400.00 per month. This would be based on an income of approximately $44,000.00 annually under the Child Support Guidelines.

The father testified that he uses his MasterCard credit card to buy the clothing and shoes for Kyle, yet he did not produce any of hiscredit card statements at trial or during this proceeding. Further, the father initially denied owing a credit card and did not disclose thisdebt on any of his sworn financial statements.

In cross-examination when confronted with the fact that he had not disclosed he owned acredit card, the father claimed he thought it was a “prepaid debit card” until his counsel explained otherwise. 11) The parties’ lifestyle also indicates a pattern of spending well beyond someone who is earning $10,000.00 per annum. Thefather and his new wife were recently married at a resort in Cancun, Mexico. Ms Fortier’s father testified that he paid for the family’stravel to Cancun, the reception and the wedding dress, although he did not pay for the accommodations at the resort.

The father-in-lawdid not know how the father paid for the resort. In December of 2010, the father and Ms. Fortier vacationed in Mont Tremblant. InFebruary of 2011, the father and Ms Fortier stayed at the Hilton in Niagara Falls. When questioned about this, the father testified that he

did not recall staying at the Hilton (only eight weeks before trial), but then eventually admitted to staying there. Although the Court ofAppeal made it clear that lifestyle is not income in Bak v. Dobel, 2007 ONCA 304 , [2007] O.J. No. 1489 (C.A.), the Court heldthat it is evidence from which an inference can be drawn that the payor has undisclosed income. 12) The father further testified that he and Ms Fortier recently sold their second home for $460,000.00 and that he spentapproximately $6,000.00 upgrading the house prior to sale, including finishing the basement and installing hardwood floors.

There is noevidence or documentation from the husband regarding the source of the $6,000.00 to pay for the home renovations. 13) The father also purchased an engagement ring for Ms. Fortier in the amount of $2,323.00. The father initially testified thathe paid for the ring with a loan from his father-in-law. The father-in-law did not confirm this in his testimony and testified that he didnot know how the father paid for the ring.

The father later testified that he paid for it himself by saving and making payments of “acouple of hundred bucks every couple of weeks.” It is clear from the receipt provided and filed as an exhibit that the father made$400.00 deposit to the diamond wholesaler on December 3, 2009 and then paid the balance in cash on January 6, 2010 in the amount of$1,973.00. There is no explanation regarding the source of this cash from the father. 14) The father was not truthful under oath to the Official Examiner during his bankruptcy proceedings.

The father gaveevidence under oath to the Official Examiner in December of 2010 that the loan he received from the father–in-law was $40,000.00, yetadmitted in this trial that the loan was $50,000.00 and also admitted for the first time at trial that he and Ms Fortier received anadditional $30,000.00 from his father-in-law which was not disclosed to the Official Examiner. The father also deposed to the OfficialExaminer that he was making monthly loan payments in the amount of $850.00 to the father-in-law. Yet in this trial, Mr. Fortier, thefather-in-law testified that nothing had been paid towards the loan.

In addition, the father did not disclose the existence of the Laurentianbank account containing the funds from $50,000.00 loan from the father-in-law until confronted with this information from the trustee,who learned about it from other sources. 15) The father continues to operate a courier business, albeit under a different name, and by its very nature, this kind ofbusiness is susceptible to unreported cash income. As Justice Murray stated in Grant v. Gibson [2008] O.J. No. 4272: “[30] Experts in income analysis have noted that “some businesses are more susceptible to unreported (cash) income and others.

Forexample, a hairdresser or mechanic is more likely to be paid in cash than the individual who is an IT consultant to major company whowould be paid by cheque.” [3] The respondent, by failing to provide much of the disclosure ordered, has deprived the applicant and thecourt of an opportunity to test his assertions as to his gross and net business income against his books and records, including bankrecords, setting out sales made and expenses paid and records with respect to his spending.

The respondent is an experienced businessperson and, according to his own evidence, employs an accountant not only to prepare his tax returns and financial statements but tomaintain his books. I see no reason why, if he wished to assist the court in accurately establishing his income, better disclosure was notprovided. [37] The father was contradictory, inconsistent and evasive in his evidence. I have serious concerns about the father’scredibility. Where the parties’ evidence differs regarding the father’s true income, I accept the evidence of the mother.

I accept that atthe height of the business during their relationship, the father was earning approximately $100,000.00 per annum from the business, inaddition to $6,000.00 or more per annum in undisclosed cash income. [38] I do not find the father to be intentionally under-employed. He appears to be working hard at developing his newbusiness. However, as a result of my findings that the father’s disclosure is a significantly deficient and that there is significantdiscrepancy between his declared income and the lifestyle he enjoys, I am prepared to draw an inference adverse to the father’s position.

In addition, the evidence establishes that the father enjoys undeclared income and has unreasonably deducted business expenses from hisgross income. The evidence also establishes that the father’s business is growing. The father also chose to claim bankruptcy and start anew business after the parties’ separation, thereby voluntarily reducing his income.

For all the above reasons, the evidence establishesthat at a minimum the father’s income for child support purposes should be imputed at $83,699.00. 7.3: Determination of Mother’s Income: [39] The mother’s position at trial is that her income, at its highest, excluding child support and child tax benefits, is $31,009per annum. [40] In the mother’s most recent sworn financial statement, dated November 1, 2010, the mother deposed that her totalmonthly income was $21, 170.96 per annum, comprising of her professional net income from Kaye Logistics and her net rental incomefrom her tenant $280.17 per month (total rental income is $1,100.00 monthly) and excluding child support and the Canada Child TaxBenefit.

At trial, the mother conceded that the rental income should accurately be reflected at $1,100.00 monthly in determining spousalsupport In cross-examination, the mother admitted that she had not included her rental income in her 2008 income tax return, althoughthis error was adjusted in 2009. [41] The mother’s monthly expenses are $3,915.29 or $46, 983.48 per year.

Her total monthly income from all sources(including child support and the Canada Child Tax Benefit) is therefore $3260.08 or $39,120.96 per annum, leaving her with a monthlydeficit of $655.21 per month, a more reasonable and credible amount than that of the father’s alleged deficit of more than $6,000.00 per

month. It is also clear from the mother’s financial statement that she has received loans from her mother to finance this deficit.

As well,the mother admitted under cross-examination that when she refinanced the family home in 2007, she increased the mortgage to accessadditional funds for the start up of her business, to pay of some of the parties’ debts including the father’s line of credit, and to pay legalfees and other expenses. [42] According to the mother’s 2008 and 2009 income tax returns, and the Statement of Business or Professional Activitiesattached, the mother’s gross business income for 2008 was $74,132.35 and her net income was $18, 551. 14.

For 2009, the mother’sgross business income was $46,046.72 and her net income was $17,809.00, as previously indicated. The mother testified that in 2010,her gross business income was even less, partly as a result of the stress of this litigation and the bankruptcy proceedings, as well as theloss of two major customers to larger companies. [43] In the mother’s Statement of Business Activities, she has deducted 75% of her total motor vehicle expenses from herbusiness income, and incurred a total of $3,810.00 in phone and utility expenses in 2009 and $4,365.00 in 2008.

Like the father, themother did not provide any explanation or documentation demonstrating how the business portion of these expenses was actuallydetermined and there is potentially a significant claw back of some of these expenses into the mother’s income.

Unlike the father, themother did not deduct a “business use of home expense” from her business income. [44] In the mother’s Consumer Proposal dated October 30, 2009, which appears to be a sworn document, she states that hertotal monthly income as of that date, excluding child support and child tax benefits was $3,100.00 or $37,200.00 per annum ($24,000.00in professional net income and $13, 200.00 in rental income). I accept that the mother’s business income was higher in 2009, based onthe evidence at trial.

However, in my view, the mother is capable of earning at least this amount as she moves forward beyond thislitigation. Further, like the father, the mother did not provide meaningful documentation supporting all of her business expenses. However, even if one-half of the mother’s vehicle and phone and utilities expenses are clawed back into her income, after the gross upcalculation, her self-employment income is $24,670.00. [45] Thee principle of imputing income applies equally to the mother, who has a duty to make all reasonable efforts to becomeself-sufficient after separation. See Decker v.

Federman, 2010 ONCJ 618 , [2010] O.J. No. 5661 and Dingle v. Dingle, 2010ONCJ 731 , [2010] O.J. No. 6029, both decisions of Justice Stanley Sherr. The mother has significant business experience asshe was actively involved in the parties’ business during their relationship. She has a grade 12 education. Despite her limited education,she presented as an intelligent, articulate and resourceful person at trial and in fact, started her own business immediately after theparties’ separation, albeit with some of the parties’ former clients from their jointly owned business.

I am satisfied that the mother ismaking reasonable efforts to become self-sufficient and that she is capable of becoming self-sufficient. [46] Based on my analysis of the mother’s current business and rental income, I have determined the mother’s income from allsources to be $40,000.00 per annum ($26,800.00 in self-employment income and $13,200.00 in rental income). 7.4: Mother’s Entitlement to Spousal Support: [47] Subsection 33(8) of the Family Law Act provides that the objectives of a spousal support order are as follows:

(8) Purposes of order for support of spouse. -- An order for the support of a spouse should, (

a) recognize the spouse's contribution to the relationship and the economic consequences of the relationship for the spouse; (

b) share the economic burden of child support equitably; (

c) make fair provision to assist the spouse to become able to contribute to his or her own support; and (

d) relieve financial hardship, if this has not been done by orders under Parts I (Family Property) and II (Matrimonial Home). [48] Subsection 33(9) of the Act sets out factors for the court to consider as follows:

(9) Determination of amount for support of spouses, parents. -- In determining the amount and duration, if any, of support for a spouseor parent in relation to need, the court shall consider all the circumstances of the parties, including, (

a) the dependant's and respondent's current assets and means; (

b) the assets and means that the dependant and respondent are likely to have in the future; (

c) the dependant's capacity to contribute to his or her own support; (

d) the respondent's capacity to provide support; (

e) the dependant's and respondent's age and physical and mental health; (

f) the dependant's needs, in determining which the court shall have regard to the accustomed standard of living while the parties residedtogether; (

g) the measures available for the dependant to become able to provide for his or her own support and the length of time and costinvolved to enable the dependant to take those measures; (

h) any legal obligation of the respondent or dependant to provide support for another person;

(

i) the desirability of the dependant or respondent remaining at home to care for a child; (

j) a contribution by the dependant to the realization of the respondent's career potential; (k) [REPEALED: S.O. 1997, c. 20, s. 3(3).] (

l) if the dependant is a spouse, (

i) the length of time the dependant and respondent cohabited, (ii) the effect on the spouse's earning capacity of the responsibilities assumed during cohabitation, (iii) whether the spouse has undertaken the care of a child who is of the age of eighteen years or over and unable by reason of illness,disability or other cause to withdraw from the charge of his or her parents, (iv) whether the spouse has undertaken to assist in the continuation of a program of education for a child eighteen years of age or overwho is unable for that reason to withdraw from the charge of his or her parents, (

v) any housekeeping, child care or other domestic service performed by the spouse for the family, as if the spouse were devoting thetime spent in performing that service in remunerative employment and were contributing the earnings to the family's support, (v.1) [REPEALED: S.O. 2005, c. 5, s. 27(12).] (vi) the effect on the spouse's earnings and career development of the responsibility of caring for a child; and (

m) any other legal right of the dependant to support, other than out of public money. [49] Spousal support is not merely a consideration of needs and means. In determining the appropriate amount of spousalsupport, compensatory and non-compensatory considerations should be taken into account in an effort to equitably alleviate theeconomic consequences of the breakdown of the relationship. See Rioux v. Rioux, 2009 ONCA 569, 97 O.R. (3d) 102, 252 O.A.C. 126,66 R.F.L. (6th) 256, [2009] O.J. No. 2949, 2009 CarswellOnt 4077 (Ont. C.A.). [50] In Bracklow v.

Bracklow, (SCC), [1999] 1 S.C.R. 420, the Supreme Court of Canada established thatthere are three kinds of entitlement for spousal support: 1) compensatory; 2) non-compensatory (based on need), and 3) contractual(based on an agreement between the parties). [51] The Supreme Court of Canada in both Moge v. Moge, (SCC), [1992] 3 S.C.R. 813, and Bracklow v.Bracklow, (SCC), [1999] 1 S.C.R. 420 set out the following examples of compensatory support:

a) A spouse's education, career development or earning potential has been impeded as a result of the marriage because, for example: a. A spouse has withdrawn from the workforce, delays entry into the workforce, or otherwise defers pursuing a career or economicindependence to provide care for children and/or spouse; b. A spouse's education or career development has been negatively affected by frequent moves to permit the other spouse to pursue theseopportunities; c. A spouse has an actual loss of seniority, promotion, training or pension benefits resulting from absence from the workforce for familyreasons;

b) a spouse has contributed financially either directly or indirectly to assist the other spouse in his or her education or careerdevelopment. [52] Compensatory support is premised on a marriage being a joint endeavor and seeks to alleviate economic disadvantage bytaking into account all the circumstances of the parties, including the advantages conferred on either spouse during the marriage. It isconcerned with an equitable sharing of the benefits of the marriage. Contractual entitlement, on the other hand, flows from the expressor implied agreement.

Finally, non-compensatory support may be ordered “where it is fit and just to do so.” See Poirier v. Poirier, 2010ONSC 920 . [53] This was a relationship of ten years. The mother was 40 years old at the time of the separation. The mother left heremployment after the birth of Kyle and was primarily responsible for childcare while the father supported the family. She wasresponsible for the childcare and household responsibilities throughout the parties’ relationship.

Once Kyle was in daycare, the motherbecame involved in the father’s business and contributed to the growth and development of that business, in which she became an activepartner until the business was transferred to him after the separation. [54] The mother entered the relationship with a mortgage free home, to which the father moved into shortly after the partiesbecame involved. She was also employed at the commencement of the relationship.

At the time of the separation, the mother was leftwithout a source of income and the $120,000.00 business debt from the parties’ former business, which she is now paying at a rate of$1,000.00 per month under the Consumer Proposal that she entered into with the trustee. Prior to entering into the Consumer Proposal,she paid $37,787.84 towards the business and family debt accumulated by the parties until she could no longer keep up with theminimum payments. [55] Although the mother was able to keep the family home, she assumed a mortgage of $350,000.00. She did increase the

mortgage by approximately $60,000.00, presumably to assist in the payment of the debts and her ongoing expenses. A dependant spouseis generally not required to deplete his or her capital assets to support himself or herself. See Goeldner v. Goeldner(ON C.A.), (2005), 194 O.A.C. 129 (Ont. C.A.). [56] I accept that when the mother started her own business in November of 2007, she retained some of the parties’ formerclients to her economic benefit and to the father’s detriment. However, the mother’s fledging business is not earning even close to theincome in the father’s new business.

It is not disputed that the father’s gross business revenue for 2009 was $136,464.00 while themother’s gross business income for that same period was $46,046.72. Further, the mother assumed the bulk of the debts from theparties’ former business once the father filed for bankruptcy. Based on the evidence at trial, the mother’s standard of living is clearlylower than the standard of living the parties enjoyed together and what the father enjoys now. [57] For all of the above reasons, I find that the mother has suffered an economic hardship as result of the breakdown of theparties’ relationship.

I further find that she deferred pursuing her own career aspirations or economic independence to provide child care,maintain the family household and to support the father in the business that he started. The mother contributed financially both directlyand indirectly to the development of the father’s business. She has been financially disadvantaged by the breakdown of the relationship. The basis for her entitlement to spousal support is therefore both compensatory and non-compensatory. 7.5: Duration and Quantum of Spousal Support: [58] The Ontario Court of Appeal in 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 CarswellOnt 43, stated that the Spousal Support Advisory Guidelines (SSAG) are auseful starting point to assess the quantum and duration of spousal support, once entitlement is established.

The court wrote at paragraph[103]: [103] In my view, when counsel fully address the Guidelines in argument, and a trial judge decides to award a quantum of supportoutside the suggested range, appellate review will be assisted by the inclusion of reasons explaining why the Guidelines do not providean appropriate result.

This is no different than a trial court distinguishing a significant authority relied upon by a party. [59] It is clear from the above passage that the Ontario Court of Appeal suggests that a trial judge who fails to address theSpousal Support Advisory Guidelines properly presented by counsel, will commit a reviewable error. Mr.

McLean has presented variousDivorcemate spousal support calculations based on the Spousal Support Advisory Guidelines, using various income figures for theparties’ income, however, none of the calculations were based on the incomes that I have ultimately determined for the father and themother. [60] Based on my review, I find that the SSAG achieve a fair and appropriate result in this case. I have prepared additionalSSAG calculations inputting the income that I fixed for both parties ($83,699.00 for the father and $40,000 for the mother), which isattached as a

schedule to these reasons. Based on the father’s income, the SSAG formula determines that the father should pay spousalsupport in the amount of $190.00 per month at the low end of the range, $523.00 per month in the middle range, and $848.00 support permonth at the high end of the range, with the duration of the order to be between 5 to 10 years. [61] In my view an appropriate amount of spousal support in the circumstances of this case is an amount somewhere betweenthe low and middle ranges, with the duration of the order to be five years, beginning with the year of separation.

This will provide themother with a reasonable transition towards self-sufficiency following her ten year relationship with the father. [62] Although I have found that the mother is capable of becoming self-sufficient and I have limited the spousal support orderto five years, there is a genuine uncertainty as to whether the mother will make the transition to self-sufficiency by September 1, 2013. The fixed term of support can therefore be reviewed at that time. See Leskun v. Leskun, [2006] 1S.C.R. The Saskatchewan Court ofAppeal in Williams v.

Williams 2010 SKCA 52 held that where a review order clearly imposes a fixed term to give the support recipientan opportunity to find appropriate employment and become self-sufficient, it is incumbent on the recipient at the review hearing toestablish that she was unable to become self-sufficient.

Absent such evidence, it is not open to the judge at the review hearing to baseongoing spousal support on the respective incomes of the spouses, as found or imputed. [63] I have chosen the low to mid-range quantum in monthly spousal support for the following reasons, following thesuggested SSAG considerations regarding the location of support within the ranges: 1) the relationship between the parties was of medium duration; 2) the mother is relatively young and she has good income earning potential. She does not have significantly high needs and hasobtained a steady source of income in her business.

Her business is capable of generating more income once the stress of this litigation isbehind her.

I am also mindful of the fact that some income generated in her business was from former customer and business contactsthat the parties had developed together in their former business; 3) although I find that the mother did incur the bulk of the family debt after the separation, she also maintained a sizeable asset,namely, the former family home, and she receives significant rental income from that asset; 4) Kyle is twelve years old and moving into his teenage years, so although the mother continues to be the primary caregiver for Kyle,her child care responsibilities will be reduced, compared to the time involved caring for a much younger child, although teenage childrenhave their own unique needs; 5) the father’s ability to pay spousal support is affected by the fact that he is now supporting a new wife and a young child, soon to betwo young children.

In Fisher v. Fisher, 2008 ONCA 11 , [2008] O.J. No. 38 (C.A.), the Ontario the Court of Appeal

recognised the principle that a payor’s obligations to his first family take priority over any subsequent obligations. Nevertheless, theCourt held that “inevitably new obligations to a second family may decrease a payor’s ability to pay support,” particularly when thepayor has his own children in the second family. 7.6: Retroactive Child and Spousal Support: [64] The mother seeks retroactive child and spousal support to September 2008, which is the date her application was issuedand served, less the child support paid by the father since that time.

The father has not paid any spousal support since he was served withthe application. [65] The mother’s claim is not actually retroactive support. See MacKinnon v. MacKinnon, , 75 O.R. (3d)175, 199 O.A.C. 353, 256 D.L.R. (4th) 385, 13 R.F.L. (6th) 221, [2005] O.J. No. 1552, 2005 CarswellOnt 1536 (Ont. C.A.). Ordinarily,once entitlement and ability to pay are established, support is payable at a minimum, from the date on which the application is served, asto do otherwise will only provide parties with an incentive to delay a final hearing. See also Fisher v.

Fisher, supra, at paragraph [81]. 8: CONCLUSION AND ORDER: [66] The final order regarding child and spousal support will be as follows: 1. Commencing September 1, 2008, the father shall pay child support to the mother in the amount of $748.00 per month, on the first dayof each month thereafter. This is based on the table amount for one child pursuant to the Child Support Guidelines, based on the father’sincome at 83,699.00 per annum for 2008 onwards. 2.

Commencing September 1, 2008, the father shall pay spousal support to the mother in the amount of $300.00 per month, on the firstday of each month thereafter, for a period of five years, until September 1, 2013. The spousal support order shall be reviewed at thattime in accordance with the direction provided at paragraph 62 of this judgment. 3. The father shall be credited with his child support payments of $12,220.00 made since September 1, 2008 (the court has included thechild support payable since the time of trial).

The total arrears owing as a result of the above orders are the following, taking intoaccount the child support payable by the father: $14,708.00 for child support and $10,800.00 for spousal support (total arrears owing$25, 508.00). The arrears shall be payable at a rate of $200.00 per month. 4.

The parties shall exchange full financial disclosure by June 1st of each year, including but not limited to, their year-end financialstatements for their sole proprietorships or corporations, including supporting documentation, their year-end statement of revenues, theircomplete corporate (if any) and personal income tax returns and notices of assessment, and a letter from their respective accountantssetting out how the personal income has been calculated. 5. If either party seeks costs, then he or she shall serve and file costs submissions, with a bill of costs and offers to settle attached, within30 days.

The other party may serve and file his or her written response to the submissions within 20 days. [67] As indicated, I have attached as

Schedule “A” to these reasons my Spousal Support Advisory Guidelines calculationsusing the appropriate software. If I have made an error in these calculations or in my calculation of support arrears owing, then counselis free to contact me within fourteen days of the release of these reasons regarding any mathematical errors. [68] Finally, by way of a postscript, both parties filed extensive email and text messages that they have exchanged post-separation and during the course of this litigation. It appears that each party was attempting to demonstrate the poor conduct andcharacter of the other.

The vitriolic correspondence between the parties, who have not actually spoken to each other for more than fouryears, is very sad to read. The only victim in all of this is Kyle, who will grow up knowing that his parents hate each other and areincapable of putting aside their own differences for the sake of their son. I hope that the parties are able to put aside their personaldifferences and change the course of Kyle’s future for the better. Released: September 23, 2011 Signed: “Justice S. O’Connell”