COURT FILE NO.: 1688
DATE: 20090128
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
KENT, JANET WILSON and PIERCE JJ.
B E T W E E N:
GARY MICHAEL CULLEN
Appellant
- and -
MAUREEN CULLEN
Respondent
Terry Hainsworth for the Appellant
Denis Burns for the Respondent
Heard at the City of London: November 21, 2008
JANET WILSON J. (ORALLY):
[1] The appellant, Gary Michael Cullen, seeks to appeal from the interim, interim order for spousal and child support made by Justice Harper on March 4th, 2008. For the reasons to follow, the appeal is dismissed.
[2] We note that the trial date in this matter is expected to take place in April of 2009.
In issue
[3] The appellant’s counsel strenuously argues that the learned motions court judge erred by including as funds available for the purpose of calculating support, the sum of $100,000 received by the appellant in the taxation year 2007 for the redemption of his class ‘A’ shares.
Background facts
[4] The appellant is the sole shareholder of a car dealership, Gary Cullen Pontiac Buick Limited (the Business). He is also a 51 percent shareholder of the holding company that owns the realty associated with the business.
[5] He purchased the business from his father.
[6] At the date of separation, in 2004, counsel for the appellant advised that the approximate value of his shares in the Business was $1,350,000. Since separation counsel estimates that there has been an increase in the value of these shares by approximately 20 percent.
[7] The parties acknowledge that the adjusted taxable income of the appellant is $144,000 without considering the question of the share redemption.
Analysis
[8] The learned motions court judge considered all of the arguments and the material before him.
[9] He concluded that it was appropriate to consider the $100,000 received by the appellant for the redemption of the share as funds available for support. The redemption of shares is prima facie acknowledged to be a capital transaction.
[10] The motions court judge outline at paragraphs 29 to 31 of his reasons why he included this payment for the purposes of calculating support:
(29) Sections 17, 18 and 19, [of the Child Support Guidelines, O. Reg. 391/97, as amended] when taken together, allow the court to make a determination of income for child support purposes that is reasonably available to a payor who has the ability to control access to funds through a corporation in which he is the sole owner.
(30) An individual who is the sole owner of a corporation has the ability to take money out of that corporation in a number of ways. The corporate owner’s choice of the method of accessing the corporate funds varies over a broad range of options that are permissible. There are multiple legitimate reasons that owners choose a particular option to access funds from their corporation.
(31) A sole corporate owner may access corporate funds by way of salary, a declaration of bonuses, share redemption or reductions of shareholder advances to a corporation as an alternative to some of the above methods.
[11] A motions court judge should be cautious about treating capital assets as income, as it may have the effect of stripping a working corporation, particularly when an equalization payment will be paid. However in the facts of this case we conclude that the learned motions court judge considered the issue and that his conclusions are supported by the evidence.
[12] The motions court judge noted that any adjustment, if necessary, can be made at the trial.
[13] The motions court judge carefully reviewed the applicable legislation in the Child Support Guidelines, O. Reg. 391/97, as amended, and in particular sections 16 to 19. The court specifically refers to section 18)1)(a), which includes the ability to attribute income based on pre-tax income of a corporation. He also refers to section 19, which deals with guidelines when a court may impute income using the broad criteria of “as it considers appropriate in the circumstances”.
[14] The learned motions court judge canvassed the relevant case law. He refers to the decision Kowalewich v. Kowalewich, 2001 (BCCA) 450, which is helpful and reviewed at paragraphs 39 and 40 of his reasons:
(39) At paragraph 37, the Kowalewich case establishes that a court need not look for signs of a person’s motivation to avoid child support, his/her bad faith or any “intentional” avoidance of a child support obligation before reaching the opinion required to trigger an adjustment order under section 17 and 18 of the Guidelines.
(40) In Kowalewich, the British Columbia Court of Appeal accepted Martinson J.’s view as expressed in Baum v. Baum (1999), 1999 5387 (BC SC), 182 D.L.R. (4th) 715, namely:
...Valid corporate objectives may differ from valid child support objectives. The purpose of section 18 is to allow the court to “lift the corporate veil” to ensure that the money received as income by the paying parent fairly reflects all of the money available for the payment of child support. This is particularly important in the case of a sole shareholder as that shareholder has the ability to control the income of the corporation.
New evidence
[15] On consent, counsel agreed to the introduction of fresh evidence. The circumstances are somewhat unusual. The relevant information was available at the date the motion was argued, that is February the 13th, 2008.
[16] Counsel has advised that the information was available to the appellant on February 7th, 2008.
[17] This information includes; financial statements of the Business and the appellant’s tax returns. We do not in any way criticize appellant’s counsel. It appears clear that these documents were available to the appellant, but were not disclosed to his counsel.
[18] Submissions were made by the appellant’s counsel at the motion being appealed that the net annual income of the Business, based on most current information, was $14,000. In fact, from the financial statements disclosed in the new evidence, the gross income before taxes was $88,000 for the business and a further $47,000 for the holding company.
Conclusions
[19] We conclude that the appellant has failed to disclose an error in law in the reasons of the learned motions’ court judge. He considered the correct law and legal principles.
[20] The factual conclusions reached are supported by the evidence and within the discretion afforded to a motions’ court judge hearing an interim, interim support motion.
[21] As it turns out, the new evidence confirms the availability of $100,000 to be considered for the purpose of support.
[22] We note that the learned motions court judge made it clear that all issues can be reviewed and adjusted, if necessary, at the trial. We note, as well, that that trial date is imminent.
[23] For these reasons, the appeal is dismissed.
KENT J.
JANET WILSON J.
PIERCE J.
RELEASED:
COURT FILE NO.: 1688
DATE: 20090128
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
KENT, JANET WILSON and PIERCE JJ.
B E T W E E N:
GARY MICHAEL CULLEN
Appellant
- and -
MAUREEN CULLEN
Respondent
ORAL REASONS FOR JUDGMENT
JANET WILSON J.
RELEASED: January 28, 2009