Court File and Parties
Court File No.: 57381/12 Date: November 27, 2014
Ontario Court of Justice
Re: Alan Todd Domb – Applicant And: Melissa Glicka Domb – Respondent
Before: Justice Roselyn Zisman
Counsel: Margaret Buchan for the Applicant Paul McInnis for the Respondent
Heard On: November 25, 2014
Reasons for Decision
1. Introduction
1The Applicant ("father") brought a motion to change on a temporary basis the terms of a separation agreement dated July 6, 2011 with respect to child support. He seeks to impute income to the Respondent ("mother") in the amount of $120,000. The mother brought a motion to change on a temporary basis to reduce the amount of child support payable pursuant to the separation agreement. Both motions were heard on November 25th, 2014. The parties relied on their affidavits filed in support of their respective motions and their financial statements.
2. Background
2The parties were married on June 23, 1997 and separated on January 15, 2011. There are four children of the marriage namely, Shoshana Leiba Domb born June 9, 1998, Mordechai Yosef Domb born January 20, 2000, Golda Malka Domb born February 27, 2002 and Shlomo Simcha Domb born October 5, 2004.
3The parties entered into two agreements namely, a parenting agreement dated May 25, 2011 that provided that the children reside with each parent on an alternating two week schedule and a separation agreement dealing with the financial issues dated July 6, 2011.
4As the children were residing equally with both parents, the child support payable was calculated on a set-off formula. Based on the mother's 2010 income of $89,000 and the father's 2010 income of $47,000, the mother paid the father child support of $878 per month. There was also a provision for the sharing of any special expenses in the ratio of 65% for the mother and 35% for the father.
5The separation agreement provides for a yearly review and in addition that either party may seek a change in child support if there is a material change of circumstances. The mother also agreed that, subject to a material change in circumstances, child support be based on her annual income of not less than $75,000.
6The father initially commenced an application to vary the parenting arrangements that the mother opposed and the mother sought in her claim to vary her child support obligations. The oldest daughter who is now 16 years old has been living with the mother full-time for the last several weeks but it is not yet known if this arrangement will continue long term. If so, then the child support arrangements will have to be varied.
3. Mother's Financial Circumstances
7The mother is self-employed and operates a business called Glicka Wig and Design. The business is run out of the basement of her home.
8She sells wigs on consignment and cleans and styles wigs. The business has two sources of revenue. The primary source is the Orthodox Jewish community where married women are required to cover their hair after marriage. The other source of income is with respect to women who have undergone chemotherapy and require a wig as a temporary hair replacement. The mother deposes that this source of income has declined substantially as she now receives and provides wigs as a charitable donation and not for profit.
9The mother submits that since the execution of the separation agreement her financial circumstances have changed for the following reasons:
a) Prior to the separation, the father was a shareholder in the business and the mother bought his interest and his share of the matrimonial home and paid him an equalization payment of $150,000. The father also managed the business and did all of the bookkeeping, preparation of financial statement and income tax returns, the payroll and banking. The mother has had to hire an accountant to prepare her financial statements and tax returns and has struggled to do all of the administrative work previously done by the father;
b) Prior to the separation, the mother employed three employees. After the separation two of her employees left and she now has only one employee who works part-time. One of the employees left to have a child and the other left to open her own business;
c) After the separation, the mother lost several of her Orthodox clients as a consequence of the separation and the subsequent religious divorce. The mother also deposes that as a consequence of her decision not to cover her hair with a wig after her divorce, a number of her Orthodox clients left her;
d) Prior to the separation the mother had the assistance of a nanny and the father who shared the childcare responsibilities. The mother lost her nanny in June 2011 and has not been able to replace her. As a consequence she no longer has assistance with respect to taking care of the household chores, cooking meals and assisting with the children. The mother deposes that being a single parent for two weeks of every month has impacted on her productivity;
e) Prior to the separation, the mother was one of three other businesses working in the Orthodox community. Now there are more than a dozen such businesses including one of the employees who left her; and
f) The mother deposes that prior to the separation she worked very long hours into the evening and found the working conditions intolerable and that the father complained that she was not spending enough time with the children. The mother deposes that the hours and pressure of the business were not sustainable and her health suffered.
10The gross revenues of the business have declined dramatically since the separation. The gross revenues and the amounts the mother withdrew from the business are as follows:
| Year | Gross Revenue | Draw |
|---|---|---|
| 2010 | $247,061 | $89,000 |
| 2011 | $47,664 | $28,768 |
| 2012 | $53,097 | $27,550 |
| 2013 | $41,766 | $19,600 |
11The mother's 2014 financial statement are not yet prepared but she deposes that she expects her gross revenues will be about the same as in 2013. The mother's income tax returns show she earned considerably less income.
12Counsel for the mother based his calculations on the draws taken by the mother. Based on the mother's draws for 2011, 2012, 2013 and up to November 2014 she has overpaid support by $46,752.
13Until recently the mother has continued to pay the father $878 per month in accordance with the terms of the separation agreement but she deposes she cannot afford to continue to do so either on the income of $89,000 she no longer earns or on an imputed income of $75,000, which is the amount stipulated in the separation agreement.
14The mother acknowledges that she receives some financial assistance from her parents if needed and that her parents also assist her with a vacation or purchasing a car for her to transport the children.
15The mother disputes she receives a great deal of cash in her business. She acknowledges that she receives about $500 per month in cash.
16The mother's financial statement shows that she has assets of $726,904 that consist of the matrimonial home and a car and debts of $295,680 that consists of a mortgage, credit card debts and a line of credit. The mother's net worth is $431,223. Her expenses of $86,672 exceed her income of $47,550 by $39,122 per year.
4. Father's Financial Circumstances
17The father is employed as an administrator of a synagogue and prior to the separation was also working with the mother in her business. The father's income is as follows:
| Year | Income |
|---|---|
| 2010 | $47,000 |
| 2011 | $42,310 |
| 2012 | $43,939 |
| 2013 | $53,334 |
| 2014 | $60,000 (estimate) |
18The father's financial statement sworn August 14, 2014 indicates that he has assets of $233,612 consisting of his condominium and debts of $164,021 consisting of his mortgage and a few credit card debts. His net worth is $69,590. The father's expenses of $81,055 exceed his income of $60,000 by $21,055.
5. Analysis
1. Has there been a material change in circumstances in the mother's financial circumstances?
19The separation agreement requires that there be a material change in circumstances to change the child support provisions in the separation agreement. The onus is therefore on the mother to prove on a balance of probabilities that there has been a change that if known at the time of the execution of the separation agreement would have resulted in a different order.
20I find that the mother has met that onus on her to justify a change in her obligation to pay child support based on the following factors:
a) At the time of the execution of the separation agreement the mother had a stable and thriving business with revenues from $163,275 to $345,928 for the preceding four years and she had three full-time employees;
b) At the time of the separation the mother's income was $89,000 whereas it has decreased to $19,600.
2. Is the mother intentionally underemployed and if so, should income be imputed to her?
21The father submits that the mother has intentionally neglected her business since the separation and that she under reports her business income.
22Section 19 (1) of the Child Support Guidelines permits the court to impute income such income as it considers appropriate in the circumstances, which includes:
(a) the parent or spouse is intentionally under-employed or unemployed, other than where the under-employment or unemployment is required by the needs of any child or by the reasonable educational or health needs of the parent or spouse;
23Imputing income is one method by which the court gives effect to the joint and ongoing responsibility of parents to support their children.
24The Ontario Court of Appeal in Drygala v. Pauli set out the following three questions which should be answered by a court in considering a request to impute income:
- Is the party intentionally under-employed or unemployed?
- If so, is the intentional under-employment or unemployment required by virtue of his reasonable educational needs, the needs of the child of the marriage or reasonable health needs?
- If not, what income is appropriately imputed?
25In Drygala v. Pauli, supra, the court interpreted section 19(1)(a) by stating that "intentionally" means a voluntary act and that a parent is intentionally under-employed if that parent choose to earn less than he or she is capable of earning. The court does not need to find a specific intent to evade child support obligations or bad faith.
26The onus is on the party seeking to impute income to the other party to establish that the other party is intentionally under-employed or unemployed. Once under-employment is established, the onus shifts to the payor to prove that his decision was reasonable.
27If the payor is intentionally under-employed, the court must consider if this is by virtue of his or her reasonable educational needs, the needs of the child or reasonable health needs.
28If a court finds a payor is intentionally under-employed or unemployed, a court cannot arbitrarily allocate an imputed income. There must be an evidentiary basis for the chosen income. Factors such as age, education, experience, skills, health and availability of job opportunities must be considered.
29The father submits that the court impute $120,000 to the mother on the basis that at the time of separation he prepared a detailed chart of the household expenses for 2010 and it indicates that the parties spent $169,217 and his income was $47,218. He therefore concludes that the profit from the mother's business was $120,000.
30The father relies on the following factors as a basis to impute income to the mother:
a) Since the separation the mother significantly reduced her work hours as she frequently travels and in the winter took Thursday off to go skiing. Thursday is the busiest business day for a wig stylist in the Orthodox community;
b) The loss of the mother's nanny should not have affected her ability to earn an income as the father also cares for the children every two weeks and he is able to work full-time;
c) Since the separation the mother reduced her employees from four to one which does not include the nanny who was claimed as a business expense. Even if her employees left, she could have hired other employees;
d) Prior to the separation the father only worked in her business for 3 or 4 hours a week so that his departure should not have affected the ability of the mother to generate similar revenues;
e) The mother's family is wealthy and generous and the children enjoy a higher life style when residing with the mother than with him;
f) The mother's lifestyle and spending including her vacations is incongruent with her claimed income;
g) Since the separation the mother must be under-reporting her income as the deposits in her bank accounts do not correspond with her claimed revenue;
h) The mother no longer advertises in the community directory; and
i) The mother failed to provide full and complete disclosure.
31The mother disputes these claims. With respect to her lifestyle the mother agrees that her parents assist her with expenses not on a regular basis but when she is financially desperate and requires funds to pay her expenses. I also note that based on the financial statements of both parents their expenses significantly exceed their income. The mother's financial statement also indicates considerable credit card debts.
32The mother denies that she travels frequently or took every Thursday off in the winter. Even if she is not there she deposes that the business is open. She also deposes that her parents have paid for trips to Arizona where they have a vacation property. Some of the other trips were to see her children at summer camp and visit with friends. Some of the other deposits relate to several inheritances she received from her aunt and grandparents. The mother has also sold her own wigs and some household appliances.
33The mother denies that she has intentionally neglected her business and deposes that she works about eight hours a day that includes the evenings and on week-ends. As she works out of her home it is more difficult to calculate her hours.
34With respect to the issue of financial disclosure the father deposes that he requested annual disclosure as required in the separation agreement and the mother refused. However, no evidence of any such requests was attached as an exhibit to any of the father's affidavits. After counsel exchanged disclosure requests, I am satisfied that both parties produced the required disclosure.
35As this is a temporary motion for a variation, I am mindful that the parties have not been subject to cross-examination and the court is not in a position to assess the credibility of the parties.
36However, based on the materials before me, I find that the father has not met the onus on him to justify imputing income to the mother. At this stage of the proceedings, the mother's explanations for the decline in her business revenues are plausible and supported by the materials filed even without the benefit of oral evidence. I cannot draw the rational inference, at this stage of the proceedings, as submitted by father's counsel that the mother is under-reporting a significant amount of income to justify imputing income to her of $120,000.
3. Should there be a temporary order to decrease in the mother's child support obligation?
37I have also considered the reasoning in the line of cases that a court should not make a practice of varying a final order on a temporary basis unless the moving party makes out a clear case for relief and proves that the continuation of the amount of child support payable would cause a hardship and that an urgent variation is required.
38In this case, based on the mother's income she cannot afford to pay the father child support and she requires an urgent variation. It is not the legal obligation of the maternal grandparents to support the children or to assist the mother in paying the father child support. If the trial judge determines otherwise, the calculation can be re-adjusted. I find that to require the mother to continue to pay the father child support is causing the mother a financial hardship when at the present time the father is earning more income than the mother.
39Based on the shared parenting arrangements and the father's income of $60,000 and the mother's adjusted income of $25,900 the father is required to pay the mother child support of $738 per month. In the event that the oldest child continues to reside with the mother full-time, the father will be required to pay the mother child support of $855 per month.
40The mother's Notice of Motion requests a temporary variation retroactive to January 1, 2014 and further retroactive re-adjustment to January 1, 2013. As this is a temporary order, I am only prepared to re-adjust the child support payments as of April 1, 2014 which was the original return date of the mother's motion. To retroactively re-adjust the support obligation any further would cause undue hardship to the father especially if at trial this order is further changed. For the same reason, I am not prepared at this stage to order the father to reimburse the mother for her over-payment of child support.
41The mother has also requested that the father pay his proportionate share of two of the child's orthodontic expenses estimated at $12,100. Based on the ratio of the incomes, the father would be required to pay 70% of the total cost. Counsel for the father did not address this issue in her submissions or in the father's affidavits and the mother did not provide any written estimates from the orthodontist or when the treatment is to commence. As the parties are returning to court in January I find that there is no urgency in addressing this issue on this motion.
5. Temporary Order
42Paragraphs 3.2 and 3.4 of the separation agreement dated is varied as follows:
Based on the Applicant's estimated 2014 income of $60,000 and the Respondent's estimated 2014 income of $25,900, and based on the child support guidelines for 4 children, on a set-off basis, the Applicant shall pay the Respondent $738.00 per month as of April 1, 2014.
This order is without prejudice to the rights of both parties to claim a re-adjustment of child support retroactively to January 1, 2012.
Support Deduction Order to issue.
Adjourned to January 22, 2015 at 10:00 a.m. for a settlement conference.
Justice Roselyn Zisman
Date: November 27, 2014