Forestell v. Forestell, 2010 ONSC 6390

CITATION: Forestell v. Forestell, 2010 ONSC 6390 PETERBOROUGH COURT FILE NO.: 3359-99 DATE: 2010-11-30 ONTARIO SUPERIOR COURT OF JUSTICE BETWEEN : Angela Forestell Applicant — and — Thomas Arthur Forestell, Sharon Ann Barton, and Mary Barton Respondents COUNSEL: Sharon M. Murphy for the Applicant Thomas Arthur Forestell is Self-Represented and was not present Sharon Ann Barton and Mary Barton did not participate HEARD: November 18 and 19, 2010 Timms J. REASONS FOR JUDGMENT [ 1 ] The applicant seeks a divorce; an order for ongoing spousal support, based on an imputed income to Mr.

Forestell of $55,000.00 a year; and an order under the Fraudulent Conveyances Act setting aside the conveyance by Mr. Forestell, on June 26, 2006, of his share in a property located at 5 Elmer Street, Grimsby, Ontario, to the added parties, Sharon Barton and Mary Barton. [1] [ 2 ] The last head of relief was added to the original claim pursuant to the order of Justice Gunsolus of July 17, 2009. The amended petition was served on all of the respondents. None of them served or filed an answer to the amended petition. Indeed, Mr.

Forestell only served an answer to the original petition for divorce, which had been served and filed on July 14, 1999, on June 24, 2009 – almost 10 years after the action began. Thus, all the respondents were in default as it relates to the third claim. [ 3 ] None of the respondents attended at the trial before me. Mr. Forestell did fax in a lengthy missive in which he said he would not be attending. He said that he could not afford the costs of travel. He also attacked the integrity of counsel for the applicant.

He did not request an adjournment, although he did suggest that the court could call him on the phone if we had questions. We did not do that.

[ 4 ] Beyond that, Mr. Forestell seemed to be primarily concerned about changing the amount of spousal support. He asserted that he had had a motion to reduce the amount of spousal support in the interim order of Justice Marchand dated October 21, 1999, outstanding for quite some time. A careful review of the file has demonstrated that Mr. Forestell did, in fact, bring a motion to change that order. However, that motion was long ago dismissed. [ 5 ] The divorce itself is the most straightforward issue. The parties separated February 11, 1999. There has been no reconciliation since then.

All of the other necessary elements of the Divorce Act have been satisfied. [2] Mr. Forestell has never opposed a divorce being granted. I am accordingly hereby making a divorce order, effective 31 days from now. [ 6 ] I will deal next with the claim pursuant to the Fraudulent Conveyances Act . [ 7 ] The parties separated after a 25 year marriage. Counsel for the applicant described Mr. Forestell’s conduct around and following the separation as “brutal”. I concur. After returning from a trade show in Las Vegas in February 1999, Mr.

Forestell announced to the applicant that the marriage was over and that he was leaving her. This was a total shock to her. He wanted the matrimonial home sold immediately and the proceeds divided equally. The applicant foolishly agreed to that. [ 8 ] After the matrimonial home was sold in the summer of 1999 and various debts paid off, the applicant only received the sum of $7,550.00. The parties had agreed that this sum would be paid to the applicant to allow her to enrol in college courses to upgrade her education.

One-half of this amount was categorised as an advance against any equalisation payment owing to the applicant. The remaining monies were to be held in trust. [ 9 ] The parties owned three other properties jointly. There were two commercial condominium units in Peterborough, out of which Mr. Forestell’s business, Kawartha Bag and Wrapping Ltd. [K.B.W.] operated, and a time-share located in Las Vegas. The time-share was eventually lost to foreclosure proceedings when Mr. Forestell did not keep up the payments.

He did however buy another one for himself and his girlfriend, Sharon Barton. [ 10 ] The two commercial condominium units were sold in 2006 after Mr. Forestell abandoned them. Mr. Forestell had gone into default on the second mortgage on the units, which mortgage was held by the Peterborough Community Credit Union, and which mortgage had been increased by Mr. Forestell subsequent to the separation. I heard evidence that the respondent had also failed to pay the municipal taxes on the units over a period of four years with the result that there was over $34,000.00 owing when the properties were sold.

As well, evidence was led that less money was ultimately received on the sale, due to the condition in which Mr. Forestell left the premises. [ 11 ] Mr. Forestell continued to operate K.B.W. after the separation. Based on the testimony of Tom Parnell, and to some extent that of the applicant, it is clear that Mr. Forestell was not reporting cash income, that he was income-splitting with Sharon Barton when she was doing little if any work, and that he destroyed company financial records to prevent the applicant and her solicitor from examining them. [ 12 ] Mr.

Forestell incorporated a new company, Peninsula Packaging Ltd. [Peninsula], in 2000. Initially only he was an officer and director. In 2002, he transferred his shares to Sharon Barton for nominal consideration. [ 13 ] In 2006 Mr. Forestell said that K.B.W. had ceased operating. This was nothing but an attempt at sleight of hand. What had happened was that over a period of time, all of the customers of K.B.W. had been switched over to Peninsula. Although Mr.

Forestell moved the physical location of the business from the jointly owned commercial condominium units in Peterborough to a rented location also in Peterborough, nothing else changed. Later on he moved the business to St. Catherines. [ 14 ] Mr. Forestell purchased himself a house in Peterborough on Orpington Street in February 2000. He lived there with Sharon Barton. He sold that home in June 2001 and bought 5 Elmer Street, Grimsby, Ontario with Ms. Barton. In May 2006 he sold his interest to Ms.

Barton and her mother Mary Barton for the stated consideration of $50,000.00. [ 15 ] The Elmer Street property was sold in July 2009. On July 17, 2009, Justice Gunsolus ordered that one-half of the net proceeds - $13,306.25 - be paid into court. [ 16 ] In July 2007 the court heard various motions relating to Mr. Forestell’s default on his spousal support obligations. It appears as if there was the amount of $43,056.99 which was then still being held in trust from the proceeds of the sale of the matrimonial home and the jointly owned commercial properties.

On consent, Justice MacDougall ordered that the applicant receive one-half of that. In addition, $7,500.00 was paid to the Director, Family Responsibility Office, to bring the support arrears into good standing. [3] The amount of $4,000.00 was paid to Mr. Forestell to allow him to take a real estate course, and the balance - $12,839.21 - was paid into court as security for the equalisation payment owing from Mr. Forestell to the applicant. In retrospect because the respondent was soon to go bankrupt, to designate this amount in this fashion was a significant error. [ 17 ] On February 12, 2008, Mr.

Forestell declared bankruptcy. In his declaration, he swore that he was unemployed. Based on the testimony of Martin Weatherall, that may well not have been true. Although the court was advised that Mr. Forestell had been discharged from bankruptcy, I do not believe that a date was given for that. [ 18 ] Because of the bankruptcy, the applicant lost anything that she might have received by way of an equalisation payment. Included in that loss was any claim that she might have had to the $12,839.21 paid into court in July 2007.

Additionally, because of the bankruptcy, the applicant is limited to one year of spousal support arrears as a preferred creditor. [ 19 ] By operation of

section 69 of the Bankruptcy and Insolvency Act , the applicant’s action for monetary relief herein was stayed. [4] As a result, the applicant brought a motion pursuant to

section 69.4 of the Bankruptcy and Insolvency Act to lift the stay. As it relates to the issue of the possible fraudulent conveyance, counsel for the applicant was required to bring a motion under

section 38 of the Bankruptcy and Insolvency Act to be allowed to pursue the claim. On September 16, 2010, the applicant obtained an order from Registrar Scott Nettie approving, nunc pro tunc , the actions taken by the applicant herein, and granting leave under

section 38 of the

Bankruptcy and Insolvency Act to proceed with respect to setting aside the conveyance from Mr. Forestell to Sharon Barton and Mary Barton. [ 20 ] The financial details and arrangements surrounding the purchase and sale of the Orpington home in Peterborough, the purchase of the home on Elmer Street in Grimsby, and the subsequent sale by Mr. Forestell of his interest to Ms. Barton and her mother, are unknown to the court. It may be that all or some of the transactions were legitimate and that proper consideration was always given and received. [ 21 ] However, when I consider all of the actions taken by Mr.

Forestell after the separation, they demonstrate a pattern on his part to defeat any reasonable claim by the applicant. Combined with that, I am satisfied that at the time of the purchase by Mr. Forestell of the Elmer Street property, at the time of his sale/transfer of his interest therein to Ms. Barton and her mother, and at the time of his bankruptcy, the applicant was a significant creditor by reason of spousal support arrears arising out of the order of Justice Marchand of October 21, 1999. [ 22 ] Finally, none of the respondents filed an answer to the amended petition.

Accordingly, it is more than reasonable to draw the inference that Mr. Forestell not only acted throughout to defeat the applicant’s legitimate claims, and that he did so specifically in May 2006 when he transferred his interest in the property at 5 Elmer Street in Grimsby to the other two respondents. Therefore, pursuant to

section 2 of the Fraudulent Conveyances Act , I am declaring the transfer from Mr. Forestell in May 2006 void as against the applicant herein. The applicant may proceed to claim, on any basis open to her under the Bankruptcy and Insolvency Act , against the sum of $13,306.25 plus interest held in trust for this action in court pursuant to the order of Justice Gunsolus of July 17, 2009. Unfortunately, given the amount of costs already payable out of that sum, there is very little left to be disbursed to the applicant. [ 23 ] That leaves the issue of spousal support. The applicant is 56 years old.

The evidence reveals that she lives quite frugally. Her expenses set out in her financial statement of November 15, 2010 show a monthly deficit of $527.60. She lives in rent-to- income-geared housing. She has no assets of which to speak. Presumably any monies received by her over the years have gone for legal fees. [ 24 ] The applicant worked for K.B.W. starting in 1989 but was “let go” by the respondent immediately after the separation. She went to college using the money referred to in paragraph [8] above.

She now has full-time employment as a receptionist earning $27,000.00 per annum, and subject to some possible annual minor adjustments, will never go beyond that. [ 25 ] The marriage herein was of almost 25 years duration. Prior to the separation, other than her work for K.B.W., the applicant last worked outside the home in 1979. She was a stay-at-home mother for the two children of the marriage. [ 26 ] The applicant has demonstrated a need for spousal support. Applying the provision of subsections 15.2 (4) and (6) of the Divorce Act , she would certainly be entitled to an order for ongoing spousal support.

The Spousal Support Advisory Guidelines would also lead to the same conclusion. [5] [ 27 ] The problem is the other side of the equation. The respondent has recently turned 58 years of age. He is on social assistance as a single person. That takes him below the poverty line no matter how measured. [ 28 ] Nonetheless, counsel for the applicant wants the court to deem income to the respondent in the amount of $55,000.00. For the reasons that follow, I decline to do so. [ 29 ] Mr. Weatherall gave evidence for the applicant. He has his own packaging company. In 2002 or 2003, he became associated with Mr.

Forestell in that the two men started to trade product back and forth. His evidence was that Mr. Forestell told him that he was closing down K.B.W. due to his divorce proceedings. Mr. Weatherall then dealt with Peninsula as he had with K.B.W. That arrangement with the new company continued after the move to St. Catherines. However, it got to the point that Mr. Forestell could not buy any product that he (Mr. Weatherall) would want, and where Mr. Forestell was asking him (Mr. Weatherall) to send product directly out to his (Mr. Forestell’

s) customers. Mr. Weatherall would ship the product and Mr. Forestell would bill the customers. [ 30 ] Then Mr. Forestell started having trouble getting any product at all from suppliers due to his poor credit rating. Up until then, Mr. Forestell had been operating out of commercial premises in St. Catherines. Mr. Forestell informed Mr. Weatherall that he had to give up those premises and asked if he could store his inventory at Mr. Weatherall’s place of business and ship the product directly from there. In May 2009, Mr. Weatherall and Mr. Forestell entered into a new arrangement whereby Mr.

Forestell became little more than a salesman for Mr. Weatherall’s company. He would receive a 20% commission for the account. Mr. Weatherall also gave Mr. Forestell an older car so that he could travel. The implication was that Mr. Forestell himself did not have the means to purchase a car. [ 31 ] Mr. Forestell brought a customer list with him. At first glance it looked impressive. It later turned out that 98% of those customer accounts had been lost — they were no longer active. Those customers were no longer prepared to deal with Mr. Forestell. [ 32 ] In June 2010 Mr. Weatherall lent Mr.

Forestell $2,000.00 to buy furniture for an apartment. The latter had just moved to London having recently separated from Sharon Barton. The evidence was that that loan would not likely ever be repaid. [ 33 ] Theoretically, Mr. Forestell was going to start a new business in the London area. He and Mr. Weatherall would continue their association. Mr. Forestell would continue to take a 20% commission for all orders and the orders would be placed through Mr. Weatherall’s company. [ 34 ] This arrangement came to an end in late September 2010. Mr. Forestell was complaining about not getting a draw. Mr.

Weatherall felt that Mr. Forestell was not working because in three months he had not created so much as one sale. From his perspective, the draws that had been provided up to then exceeded the amount earned on commission. Mr. Weatherall offered him a position as an employee for a 10% commission. That offer was not looked upon kindly by Mr. Forestell. Threats were made; Mr. Forestell had burned another bridge.

[ 35 ] There was some evidence that Mr. Forestell has, since September 2010, attempted to have an association with another company in the packaging field, Amos and Simpson. On Mr. Weatherall’s evidence, it would seem very unlikely that he will succeed or even if he actually has such an association with that company. Mr. Weatherall felt that if anything, Mr. Forestell’s credit situation had become worse since 2008. He also felt that no one would even extend credit to Mr. Forestell or even do business with him. In the approximately 16 months during which they had their previous arrangement, Mr.

Forestell had earned the grand sum of $12,000.00 in commissions. [ 36 ] As I said in paragraph [27] above, we know that Mr. Forestell is on social assistance now. The amount he receives is far below that which is earned by the applicant, which is itself quite modest. [ 37 ] Counsel for the applicant accepts that Mr. Forestell has very little income at the present time. She still wants the court to make a final spousal support order based on a deemed income of $55,000.00 per annum. She has cited a number of cases in support of that proposition.

I will not set them out herein. [ 38 ] Obviously, the court can make an order based on imputed income. Examples would include a situation where the putative payor was purposefully unemployed or underemployed, or when he/she has taken other steps to deliberately avoid his/her obligations. [ 39 ] Presently that is not the case here. It is beyond dispute that the respondent is responsible for his own situation. He has very definitely made his own bed in which he now must lie. He has made a series of decisions which have resulted in both parties having next to nothing.

That said, the applicant is currently better off than her husband. She at least has a job. He does not and if Mr. Weatherall is correct, he will be unable to obtain one in the field in which he has spent his entire life. When he had his arrangement with Mr. Weatherall, starting in May 2009, he was earning an annual equivalent of less than $10,000.00. [ 40 ] As I said in paragraph [28] above, I will not make any spousal support order now, not even one for nominal support. I have found a need but not ability.

The interim order of Justice Marchand is now terminated, effective as of October 31, 2010. [ 41 ] At some future point, it may be that Mr. Forestell will again earn sufficient money such that a spousal support order would be justified. With that in mind, I am ordering that Mr.

Forestell immediately provide the applicant with a copy of his 2009 income tax return and accompanying notice of assessment, and thereafter that he provide copies of his annual income tax returns and notices of assessment starting with the 2010 taxation year, no later than June 1, of every year. [ 42 ] The applicant has asked for costs fixed in the amount of $10,000.00. She did not present a bill of costs or any other documents to sustain that figure. That said, a quick examination of the file itself does justify that.

Even though I cannot imagine that the applicant will even be able to collect on any costs order, I so order. [ 43 ] This matter took far too long to come to trial. There were several reasons for that, including the respondent’s bankruptcy. However, there were significant gaps of time when nothing happened. For example, after a flurry of activity in the summer and fall of 1999, the parties did not come back to court until the summer of 2003. That was followed by six years of periodic appearances at various conferences and motions. Someone should have taken the responsibility to get this on for trial long before.

The Honourable Mr. Justice D. Roger Timms DATE RELEASED: November 30, 2010