Converti v. Escobedo, 2011 ONCJ 627

Toronto (North York) Registry No. D52319/10 DATE: 29·III·2011 CITATION: Converti v. Escobedo , 2011 ONCJ 627 ONTARIO COURT OF JUSTICE TORONTO NORTH FAMILY COURT B E T W E E N: ) ) ANDREA VIVIANA CONVERTI ) ) ) Nilufa Husein, for the APPLICANT ) APPLICANT ) ) - and - ) ) LUIS SERGIO ESCOBEDO RESPONDENT ) THE RESPONDENT, noted in default on February 3, 2011 ) ) ) ) ) ) ) ) HEARD: 25 March 2011 JUSTICE S.B. SHERR REASONS FOR DECISION 1: INTRODUCTION [ 1 ] This uncontested trial was heard on 25 March 2011. The applicant (the mother) seeks the following orders against the respondent (the father):

a) Child support for the parties’ daughter, age 5, including an order that the father contribute towards the child’s special and extraordinary expenses pursuant to

section 7 of the Child Support Guidelines , O. Reg. 391/97, as amended (the guidelines).

b) Imputing the father’s annual income to be $150,000.

c) That the support payments start on 1 September 2010.

d) Costs in the sum of $5,000, to be enforced by the Director of the Family Responsibility Office as support.

e) That the father be prohibited from bringing any further proceedings until he has provided proof that the costs order has been paid. [ 2 ] The father did not file an answer in this case. On 13 December 2010, the parties attended at first appearance court and entered into minutes of settlement that were incorporated into a court order. The parties agreed that the mother would have final custody of the parties’ daughter and be permitted to obtain a passport for the child and travel outside of Canada with the child without the father’s consent. The father did not seek access.

Based on his stated annual income of $87,360, the father agreed to pay temporary child support in the sum of $777 per month commencing on 1 September 2010. The parties agreed to exchange financial disclosure. The father was granted an extension until 6 January 2011 to file his answer and financial statement. [ 3 ] The mother provided the father with her financial disclosure. The father did not file an answer and provided the mother with very limited financial disclosure, none of which he filed with the court.

The father did not provide the mother with his income tax returns and notices of assessment for the previous three years as required by the court order. [ 4 ] The parties attended at a case conference before me on 3 February 2011. The mother sought to note the father in default for his failure to file his answer. Discussions were held and the matter was held down to permit the parties to discuss the matter further. The father instead chose to leave the court and refused to return when contacted. The father was noted in default. However, the door was still left open for him to participate in the case.

The mother was directed to serve the father and file with the court her proposed Form 23C (affidavit in support of uncontested trial) and the court’s endorsement. The father was given a deadline to file a motion to set aside the order noting him in default. This procedure ensured that the father would have notice about the specific relief requested by the mother and gave him one more chance to participate in the case. [ 5 ] The father was served with the mother’s Form 23C and the court’s endorsement.

He did not move to set aside the order noting him in default. [ 6 ] The mother’s Form 23C was brought to me in chambers on 17 March 2011. I endorsed that I required better evidence to support the relief requested and gave the mother the option of filing a further Form 23C or giving viva voce evidence. The mother chose the latter option and I heard viva voce evidence on 25 March 2011. 2: BACKGROUND [ 7 ] The mother is 43 years old. The father is 50 years old. They met and began living together in Argentina in 2004. They are the biological parents of the child. The family moved together to Chile in 2007.

The father came to Canada shortly after and sponsored the mother and child, who came to Canada in March of 2008 to live with him. The mother is now a permanent resident. The parties resided together until 1 September 2010. [ 8 ] The child has significant special needs. She has Down’s Syndrome and had heart surgery when she was 6 months old. She requires significant therapy and attends occupational therapy and speech and language therapy. She is a challenging child to parent. [ 9 ] The mother was a lawyer in Argentina.

However, because of the child’s intense special needs, she stayed at home and assumed exclusive care of her. The father worked in the construction field and financially supported the family.

[10] The mother has for the most part stayed at home on a full-time basis to care for the child since arriving in Canada. She has onlybeen able to obtain nominal part-time work. The child has many appointments with doctors, therapists and speech and languageconsultants. She attends art and swimming programs that have been recommended to the mother by the child’s service providers. Themother has assumed full responsibility for attending to all of the child’s needs.

Sadly, the father has chosen not to be involved with hisdaughter. [11] The father supported the family in a financially comfortable lifestyle until they separated in September of 2010. [12] The mother detailed incidents of abuse by the father towards her that led to the separation. She was twice forced to leave thefamily home and take the child to a shelter. She remains afraid of the father. [13] The father has given the mother only $777 since the separation.

The mother has depleted her savings to support the child andherself. 3: THE FATHER’S INCOME AND THE TABLE AMOUNT FOR CHILD SUPPORT [14] The mother asks the court to impute the father’s income at $150,000 per annum. She argues that the court should order thisamount because she put the father on notice that she was seeking this amount and that an adverse inference should be drawn from bothhis failure to defend this claim and his failure to provide the financial disclosure required. [15]

Section 19 of the guidelines reads as follows: Imputing income 19.

(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. O. Reg.391/97, s. 19 (1); O. Reg. 446/01, s. 6. Reasonableness of expenses

(2) For the purpose of clause (1) (g), the reasonableness of an expense deduction is not solely governed by whether the deduction ispermitted under the Income Tax Act (Canada). O. Reg. 391/97, s. 19 (2). [16] Imputing income is one method by which the court gives effect to the joint and ongoing obligation of parents to support theirchildren. See: Dryagla v. Pauli (ON CA), [2002] O.J. No. 3731 (Ont. C.A). The categories listed in

section 19 ofthe guidelines that permit imputation of income are not exhaustive. See: Riel v. Holland (ON CA), [2003] O.J. No.

3901 (C.A.). [17] The court is prepared to impute income to the father, but not to the extent requested by the mother. Notwithstanding the father’sfailure to defend the claim and provide full financial disclosure, the court must still have an evidentiary basis upon which this finding canbe made. See West v. West (ON S.C.). In Graham v. Bruto 2008 ONCA 260, the court inferred that the failure todisclose would mitigate the obligation of the recipient to provide an evidentiary basis to impute income.[1] However, an adverseinference should not in and of itself support imputing any income that a recipient requests.

There should be a proportionate connectionbetween the extent of the adverse inference that the court is being asked to draw and the evidence provided. [18] The father provided the mother with a sworn financial statement in November of 2010 (the financial statement) deposing that heearns $87,360 per annum.[2] The father deposed that he earned $51,360 annually in salary and bonuses as a construction worker with hisemployer Bayview Homes, $1,200 per year from investments and $34,800 annually from rental income. [19] The mother deposed that the father does freelance construction work for other companies that he did not disclose in the financialstatement.

She testified that he did such work while she resided with him. She also filed two 2010 pay stubs (with nominal payments)payable to the father from different companies. She asked the court to impute significant additional income to the father for thisundeclared work. She had no direct knowledge of the extent of this additional work. [20] The father’s 2010 income from Bayview Homes is not difficult to determine. He provided the mother with a year-to-date paystub dated 25 November 2010 that reflects gross income of $50,137.50. This rate-of-pay projects to a gross income of $55,471 for 2010.

I accept the mother’s evidence that the father supplemented this work with other companies. The father was put on notice that themother was alleging that he was earning undeclared income and chose not to contest this allegation. The court will also draw an adverseinference against the father for his failure to provide full financial disclosure as ordered.

However, since the job with Bayview Homes isfull-time and the mother lacks specific knowledge about the additional work, I am only willing to impute an additional 10% of grossincome to the father for this additional undeclared work ($5,547), for a total employment income of $61,018 per annum. [21] The additional amount imputed to the father will be grossed-up.[3] The grossing-up of income is done to ensure consistency oftreatment where a party is found to have arranged his or her affairs to pay less tax on income. See Sarafinchin v. Sarafinchin, (ON SC), [2000] O.J. No. 2855 (Ont. S.C.).

A divorce-mate analysis shows that the income should be grossed up by thesum of $7,408.[4] [22] The mother also seeks to impute additional rental income to the father. However, her evidence did not persuade the court to dothis. She testified that the father rents out his home to four tenants at $800 per month per tenant. This amounts to $38,400 annually. Thefather’s inclusion of rental income of $34,800 per annum is close enough to the amount suggested by the mother. The court accepts thefather’s figure. [23] The mother’s request to impute additional investment income to the father had more merit.

The mother led evidence that thefather has not fully disclosed his capital assets or his investment income. She provided the court with a financial statement of affairsprovided by the father to the Bank of Nova Scotia in 2005. In this document, the father states that his net worth is $917,000. The father,in his financial statement of November 2010, stated that he owned a home with equity of $421,000 and had bank accounts of close to$6,000. This leaves the question of what has happened with the balance of the equity ($490,000)[5] that he declared to the bank in 2005.

The mother was able to produce a copy of a United States bank account dated in 2008 in the father’s name for $25,000. This was notdisclosed in the financial statement. This supports the mother’s contention that the father is deliberately hiding the existence of assetsfrom the court. [24] The court will impute income to the father for his failure to adequately explain what has happened with this capital, and willoperate on the assumption that he still has capital assets (not including his home) in the range of $500,000.

The grounds for imputationfall under several categories: failure to report income actually earned; failure to generate reasonable income from capital; and an adverseinference due to his failure to provide financial disclosure. [25] In Greenglass v. Greenglass 2010 ONCA 675 , [2010] O.J. No. 4409 (C.A.), the Court of Appeal imputed an annualrate of return of 2% on the investments of both the payor and recipient as “a reasonable rate a prudent investor might be able to earn, atthe relevant time”.

Here, the mother provided interest rate information for both short and medium length investments from the Bank ofNova Scotia indicating annual investment rates that ranged between 1.5% and 3.5% per annum, depending on the duration of theinvestment.

[ 26 ] The mother also provided evidence that the father could achieve a 5% annual return on a long-term investment at the Bank of Nova Scotia. However the court finds that it isn’t reasonable to require a party to tie up their assets on a long-term basis just in order to obtain the highest interest rate available at the time. [ 27 ] The father can obtain a 3-year GIC that will pay him an annual interest rate of 3%. The court finds that this is a reasonable rate to apply to the capital assets of $500,000 that the father has failed to account for.

The court finds that the father is or could be earning $15,000 annually in investment income. [ 28 ] The court imputes the father’s annual income to be $118,226 calculated as follows: Employment Income $61,018 Rental Income $34,800 Investment Income $15,000 Gross-up of Income $ 7,408 Total $118,226 [ 29 ] The court can impute income based on the lifestyle of the payor. See: Graham v. Bruto , supra . The father in his financial statement claims monthly expenses, just for himself, of $5,588 per month. This does not include any support obligation.

This declared lifestyle is consistent with an individual who is earning the income that is being imputed to him. [ 30 ] The father shall pay the mother the table amount of child support of $1,018 per month, based on an annual income of $118,226 per annum, on the first day of each and every month starting on September 1, 2010 (the start date agreed to by the parties on December 13, 2010). The father will be credited with his one payment made of $777. Part Four –

Section 7 expenses [ 31 ] The mother provided the court with documentary evidence to support her claims for special and extraordinary expenses pursuant to

section 7 of the guidelines. The mother established to the court’s satisfaction that the special and extraordinary expenses claimed for the child are both reasonable and necessary as required by

section 7. This is a child who requires considerable therapeutic intervention and needs to participate in activities to facilitate her development. [ 32 ] The court finds that the swimming and art classes claimed by the mother qualify as extraordinary expenses as defined in subsection 7 (1.1) of the guidelines. These are expenses that the mother cannot reasonably cover with the table amount of child support and her own income sources. These expenses are reasonable and necessary expenses for this child, in light of her special needs. They are affordable for the father. [ 33 ] The

section 7 expenses that will be allowed for 2010 are: Swimming $130 Music Therapy $620 Speech/Language Therapy $1208 Bloorview Arts Program $100 Transportation Costs $500 Total: $2,558 [ 34 ] The court notes that it is unusual to permit transportation costs as

section 7 expenses. This case is unique. The evidence satisfied the court that due to the special needs of the child, she could not be taken on public transit to her programs. The mother described how the child, due to her behavioural issues, would be uncontrollable and try to run away from her in public, creating unsafe situations for both her and other transit passengers. The mother had to take the child by taxi to these programs. I find that these transportation expenses formed part of the overall cost of the therapeutic and extra-curricular programs set out above. Transportation expenses closely associated

with the special expenses claimed have been permitted in Jarbeau v. Pelettier, [1998] O.J. No. 3029 (Prov. Div.) and in Welsh v. Welsh[1998] O.J. No. 4550 (Gen. Division. The mother indicated that she used the balance of her savings to purchase a used car at the end of2010. As a result, transportation expenses were not claimed for 2011. [35] Subsection 7(2) of the guidelines sets out that the guiding principle in determining the parties’ respective contributions to section7 expenses is that the parties share these expenses in proportion to their respective incomes. The father’s share of the

section 7 expensesin 2010 will be 72.1%, or $1,844.32.[6] [36] The

section 7 expenses projected for 2011 that will be allowed are: Swimming $600 Music Therapy $450 Speech Therapy $1,208 Arts Program $360 Occupational Therapy $4,320 Total: $6,938 [37] The father will be required to pay the mother the sum of $308 per month on the first day of each and every month, commencingon January 1, 2011, as his proportionate share of these expenses.[7] Part Five – Spousal Support [38] I had no difficulty finding that the mother is entitled to spousal support on both a compensatory and non-compensatory basis. See Bracklow v. Bracklow, (SCC), [1999] 1 S.C.R. 420.

The parties agreed that the mother would stay at home to carefor a special needs child. She was also responsible for the management of the family household. This freed the father to concentrate onhis career and to maximize his income. The mother is a lawyer but gave up the pursuit of her career for her family. She has beenfinancially disadvantaged by the breakdown of the relationship. Her earning potential will also be compromised by her ongoing child-care obligations. See Moge v. Moge, (SCC), [1992] 3 S.C.R. 813.

The reality is that due to the special needs of thechild, the mother will need to be home for the foreseeable future to be available to take the child to her multiple appointments andprograms. At best, she will only be able to find modest part-time work. Lastly, while she is quite intelligent, the mother’s English is verypoor, which adversely affects her employability. [39] The father has made it clear that he will offer the mother no assistance with the child. The mother is struggling to make endsmeet and will likely continue to have this struggle. She has depleted the capital assets she had at separation.

She needs spousal supportand the father has the ability to pay it. [40] The mother testified that she will be taking a three-month skills program beginning on April 1, 2011. She hopes to be able to earnpart-time income of $10,000 per annum. The mother submitted her divorce-mate calculations based on her income being $10,000 perannum. This is very reasonable in these circumstances. [41] The test for imputing income for child support purposes applies equally for spousal support purposes. Rilli v. Rilli, [2006] O.J.No. 2142 (SCJ); Perino v. Perino (ON SC), [2007] O.J.

No. 4298 (SCJ). [42] The Ontario Court of Appeal in Fisher v. Fisher 2008 ONCA 11 stated that the Spousal Support Advisory Guidelines (Ottawa:Department of Justice, 2008), by Carol J. Rogerson and D.A. Rollie Thompson (SSAG), while only advisory, are a useful starting pointto assess the quantum of spousal support, once entitlement is established. [43] The SSAG indicate that the father should pay spousal support of $1,730 in the lowest range, $2,145 per month in the middlerange and $2,544 in the highest range.

This order would initially be indefinite in duration and possibly reviewed, with a minimumduration of three years and maximum duration of thirteen years. [44] The mother sought spousal support in the mid-range of these guidelines. This was very reasonable especially considering that:

a) The father has abandoned all child-care responsibilities for this high-needs child.

b) The mother’s work opportunities will be severely limited by having to remain available to attend to the child’s medical andtherapeutic needs.

c) The mother has sacrificed a significant career for the child.

d) The mother has actually only earned income at the rate of $4,000 per annum since September 1, 2010 and she prepared her SSAGcalculations on a projected income of $10,000 per annum. She is unlikely to begin earning this level of income until July of 2011 at theearliest.

b) The father has failed to provide the financial disclosure ordered. [45] The spousal support payments will begin on September 1, 2010. [46] Based on the court’s finding that the father is to pay the mother the mid-range SSAG level of spousal support, the divorce-mateanalysis indicates that the father will be required to pay the mother the following monthly amounts on an ongoing basis:

a) Table amount for child support - $1,018

b) Share of

section 7 expenses - 308

c) Spousal support - 2,145 [ 47 ] The divorce-mate analysis shows that after making these payments the father will still have net disposable income of $4,081 per month, which is 49.7% of the total net disposable income for the family. Part Six – Costs [ 48 ] The mother seeks costs of $5,000. The court finds this request to be reasonable. The mother had to pursue and decipher incomplete financial disclosure from the father, prepared a lengthy Form 23C, multiple divorce-mate calculations and attended at court for a half-day for this hearing.

The matter was made unnecessarily difficult by the father’s refusal, despite many reasonable requests by the mother’s counsel to provide full financial disclosure. The mother’s behaviour was reasonable; the father’s was not. [ 49 ] The mother also seeks an order that the father prove that these costs have been paid prior to his being permitted to make any further claims before the court. Given the father’s conduct and the fact that I find that he has the ability to pay this costs order, the mother’ request will be granted. Part Seven – Conclusion [ 50 ] A final order will go on the following terms:

a) The father will pay the mother the guideline table amount of child support for one child of $1,018 per month on the first day of each and every month, commencing on September 1, 2010, based on an imputed annual income of $118,226.

b) The father shall forthwith pay the mother the sum of $1,844.32 on account of his share of special expenses under

section 7 of the guidelines for the period ending December 31, 2010.

c) The father shall pay the mother the sum of $308 per month on the first day of each and every month, for his proportionate share of special expenses under

section 7 of the guidelines, commencing on January 1, 2011.

d) The father shall pay the mother spousal support in the sum of $2,145 per month, on the first day of each and every month commencing on September 1, 2010.

e) The father shall pay the mother’s costs fixed in the sum of $5,000. This shall be enforceable by the Family Responsibility Office as support.

f) The father shall not be permitted to bring any further court proceeding until he provides proof that the costs order has been paid.

g) The father will be credited with one child support payment made of $777.

h) The father shall provide the mother annually by April 28, the financial disclosure required by

section 25.1 of the guidelines.

i) Support Deduction Order to issue. 29 March 2011 Justice Stanley B. Sherr