Court File and Parties

Ontario Court of Justice

Date: 2018-04-17

Court File No.: Toronto DFO-17-15856

Between:

Maria Ornella Galati Applicant (Responding Party on Motion to Change)

— AND —

Andrew Elvy Leach Respondent (Moving Party on Motion to Change)

Before: Justice Sheilagh O'Connell

Heard on: January 12, 2018

Reasons for Judgment released on: April 17, 2018

Counsel

Amy Secord — counsel for the applicant, Ms Galati

Andrew Elvy Leach — on his own behalf

Diane Gillese — counsel for the Family Responsibility Office

Ms A. Tsagaris — Assignee, City of Toronto Social Services

O'CONNELL J.:

Introduction

[1] The Applicant mother has brought a motion to strike the Respondent father's motion to change and requests an order that the father shall not be permitted to bring any further motions to change without leave of the court, or to seek any further relief in the event that disclosure is not provided. In the event that the motion to strike is granted, the mother requests that the father's motion to change be dismissed.

[2] The father has brought a motion to change the final child support order of Justice Geraldine Waldman dated September 10, 2012. The existing order imputed the father's annual income at $104,000.00 and ordered him to pay child support to the applicant mother in the amount of $911.00 per month, commencing July 24, 2012. This is the table amount for one child based on the income imputed to the father, in accordance with the Child Support Guidelines for Ontario.

[3] In his original motion to change, the father asks the court to reduce his child support to $200.00 per month, based on undetermined income, and to fix his arrears at $2,760.00, payable at a rate of $50.00 per month. However, during the hearing of this motion, the father asked the court to reduce his child support to $300.00 per month, which is the amount of child support he is currently paying on a voluntary basis for one of his other two children. This amount is based on an income of $34,650.00 per annum under the Child Support Guidelines.

[4] The mother requests that the existing final order remain in full force and effect and that the father continue to pay the mother $911.00 per month in child support based on an imputed income of $104,000.00.

[5] The arrears of child support owed by the father are currently $41,142.00, according to the most recent Statement of Arrears filed by the Family Responsibility Office.

[6] The mother assigned her interest in child support to the Ministry of Community and Social Services for the period from July 1, 2012 to November 30, 2012 and then again from January 1, 2015 to January 31, 2017. The assignee is owed $23,231.90.

Brief Background Facts

[7] The father is 42 years old. The mother is 40 years old.

[8] The parties were in a relationship but never lived together.

[9] The parties had one child together, Arihana. Arihana has always lived with the mother and has had sporadic and inconsistent contact with the father. She will be 10 years old in May of this year.

[10] According to the father, he had somewhat regular visits with Arihana until approximately 2015. According to the father, at that time, the parties got into an argument and he then had very sporadic and intermittent contact with Arihana after that. The last time the father saw Arihana was in June of 2017.

[11] The father has two other children, Angelina, who will be 12 years old in July, and Quentin, who is 5 years old. The father pays child support to the mother of Quentin in the amount of $200.00 per month pursuant to a mutual agreement between them.

[12] The father is in a common law relationship with Ms Eng Heng, the mother of Angelina. They were in a relationship for 21 years and lived in a common law relationship for many years. They reside in a home owned by the common law partner's mother in Maple, Ontario. Ms Heng is employed as a secretary and earns approximately $26,000.00 annually.

[13] During the course of the motion to change, the father advised the court that he and Angelina's mother had separated and he had moved out of the family home. Angelina and her mother continue to live in the home. The father is apparently staying with various friends. It was not clear whether this was a permanent or temporary separation. The father indicated that he wished to reconcile with his partner after some of the issues in this motion to change are resolved. The father stated that he is currently paying support to Angelina's mother on a voluntary basis in the amount of $300.00 per month pursuant to a mutual agreement between them.

[14] The father has a long history of working in construction, primarily as a drywaller and plasterer for many years. He is currently employed as a drywaller. He states that he is paid an hourly rate of $21.00 per hour by his current employer in a non-unionized position. He states that the work is often seasonal and that he was not working during some of the winter months in early 2018. This information was confirmed by his employer when the Family Responsibility Office contacted the father's employer, according to FRO counsel. He is paid by cheque.

[15] The father was not working for a period of time in 2016 after FRO suspended his driver's licence. His driver's license was reinstated by FRO on November 30, 2017 after the father entered into a temporary default order and made a number of payments pursuant to that order. The father states that he experienced significant financial struggles after his license was suspended as without a license, he struggled to maintain employment.

[16] The mother has four other children, all of whom live with her with Arihana. She is a single parent and receives social assistance. She is currently awaiting approval for disability benefits. The mother has not re-partnered.

[17] The mother commenced her original application for custody and support in 2012. The father was personally served but did not participate. He was noted in default. On September 10, 2012, the father did not attend court. He states that he got the dates mixed up. The mother was granted final custody, incidents of custody and child support. The father was granted reasonable access at the mother's discretion, including her discretion as to the level of supervision.

[18] The existing order for child support was based on the evidence prepared by the mother by way of a Form 23c Affidavit, sworn September 10, 2012, with the assistance of a Family Support Worker and duty counsel.

[19] The mother deposed that the father was a seasoned drywaller who earns $50.00 cash per hour and that he owns the house in Maple, Ontario where he was living with his wife and in-laws, valued by the mother at 1.5 million. In her affidavit, the mother calculated the father's income for child support purposes as follows: $50.00 per hour multiplied by 40 hours per week multiplied by 52 weeks per year, which equals $104,000.00. The mother also attached the 2009 CRA Guidelines for plasterers and drywallers which at its highest, indicated an hourly rate of $34.00.

[20] In January of 2017, the father commenced this motion to change in the Superior Court of Justice in Newmarket after FRO commenced enforcement proceedings in 2016 and suspended the father's driver's licence.

[21] In May of 2017, the motion to change and the FRO enforcement proceedings were transferred to this court. The first case conference in the father's motion to change occurred on June 21, 2017. At that appearance, the parties entered into a temporary order, on consent, that the father provide detailed financial disclosure, including but not limited to the following:

1. An updated fully completed Form 13 Financial Statement;
2. Notices of Assessment for 2012, 2013, 2014, 2015 and 2016;
3. Proof of current employment or self-employment;
4. Record of Employment and complete income tax returns from 2012 to present;
5. Bank statements from 2012 to present;
6. Credit card statements, if any, from 2012 to present;
7. In the event that the Respondent does not have the above, letters from all major banks confirming that the Respondent holds no accounts or credit cards;
8. Proof of where the Respondent is residing.

[22] On September 21, 2017, the parties returned for a continuing case conference. The father was represented by counsel at that time. He filed a case conference brief and provided some of the disclosure ordered but requested a further adjournment to compile the balance of the disclosure ordered.

[23] On November 24, 2017, the father did not attend court in the morning and was no longer represented by counsel. He eventually arrived at 1:00 PM. He had not produced the outstanding disclosure ordered. The matter was adjourned to January 12, 2018 and the mother was granted leave to bring a motion to strike the father's pleadings if necessary.

[24] On January 12, 2018, the matter returned before me for argument on the mother's motion to strike. The father attended with some further disclosure at that hearing and was provided summary legal advice by duty counsel before the motion. He did not file any responding materials.

Position of the Parties

[25] The mother submits that the father's pleadings should be struck due to his deliberate and complete failure to comply with financial disclosure orders and to produce adequate financial disclosure. She further requests that the father's motion to change be dismissed or that she be permitted to proceed on an unopposed basis to seek a final order.

[26] The mother submits that the father has not proven any change in circumstances since the Final Order was made. It is the mother's position that the father continues to be self-employed as a drywaller doing the same work that he has been doing since prior to the Final Order.

[27] She further submits that the father has an extravagant lifestyle and that he is likely earning more income now. According to the mother, the father has been working as a drywaller since he was a teenager and believes that he is earning in the high range for this kind of work. She further believes that he owns the home on Maple Avenue, valued at 1.5 million, according to the mother, and that he drives a Ford F150 vehicle.

[28] The father submits that he has attempted to comply with the orders for financial disclosure to the best of his ability. He has provided his notices of assessment, proof of his current income and an updated sworn financial statement. He has provided some of his bank statements. He states that he does not have any other credit cards or other bank cards and that he, through his previous counsel, has written to all major banks seeking this confirmation. According to the father, this information is in his previous lawyer's file.

[29] The father further denies that he owns the home in Maple, Ontario or that he ever owned it. He states that the home has always been owned by his mother-in-law, his common-law wife's mother. He further states that his former common law wife owns the vehicle that he drives, a white Ford 150. He denies the claim that his other daughter Angelina attends private school, as the mother claims and states that she is in a nearby public school in the neighbourhood.

[30] Finally, the father states that he has never earned $104,000.00 per year as a drywaller. He states that he started as a labourer at the age of 18 and gradually worked towards being a "taper" and then a drywaller. He is not a member of a union, nor does he have a college degree or formal training. He apparently has a high school education. He states that he has never earned $50.00 per hour. The father states that in 2016 he had little to no income after FRO suspended his driver's license and he was unable to drive to work sites. When FRO reinstated his license after he entered into court ordered payment arrangement, he was able to start working again and is now earning $21.00 per hour, according to the statements from his current employer.

The Law and Governing Principles

The Mother's Request to Strike the Father's Pleadings

[31] The court authority to strike the father's pleadings is as follows:

1. Sub-rule 1(8) of the Family Law Rules ("the Rules") - The court may deal with the failure to follow an order in a case by "making any order that it considers necessary for a just determination of the matter", including an order dismissing the claim, striking out any application, answer, motion to change, among other pleadings, or any other document filed by a party, among any orders described under this Rule.

2. Section 24 of the Child Support Guidelines - If a party does not comply with an order to provide documents under section 22 of the Child Support Guidelines, the court can strike out that party's pleadings, proceed to a hearing, in the course of which it may draw an adverse inference and impute income to the parent that the court considers appropriate.

[32] Subrule 1(8.4) of the Rules provides that if an order is made striking out a party's application, answer, motion to change or response to motion to change in a case, then the party is not entitled to any further notice of steps in a case, except for service of a court order and the party is not entitled to participate in the case in any way. The court may deal with the case in the party's absence and a date may be set for an uncontested trial.

[33] In Van v. Palombi, 2017 ONSC 2492, the Divisional Court held that the case law well establishes that the legal principle governing the exercise of judicial discretion to strike a party's pleadings is a three-pronged test as follows:

(1) Is there a triggering event justifying the striking of pleadings?

(2) Is it appropriate to strike the pleadings in the circumstances of the case?

(3) Are there other remedies in lieu of striking pleadings that might suffice?

[34] However, the case law is clear that striking a party's pleadings is a remedy of last resort. In a number of decisions, the Ontario Court of Appeal has made it clear that the power to strike out a party's pleadings should be used sparingly and only in exceptional cases. See Roberts v. Roberts, 2015 ONCA 450; Manchanda v. Thethi, 2016 ONCA 909.

[35] Even in the event of a court finding a "triggering event", justifying the striking of pleadings, it is still within the discretion of the court to decide to strike or not on all of the circumstances of the case. Given the exceptional nature of the remedy, the court should examine other remedies that might be appropriate in lieu of striking pleadings, which is the third step of the three-pronged test. See Van v. Palombi, supra, at paragraph 36.

[36] In Chiaramonte v. Chiaramonte, the Ontario Court of Appeal held that in family law cases, pleadings should only be struck and trial participation denied in exceptional circumstances and where no other remedy would suffice, following its earlier decision in Purcaru v. Purcaru. The Court of Appeal went on to say as follows at paragraph 32 of that decision:

"Striking a party's pleadings is a drastic remedy that should only be applied in exceptional circumstances. The rules authorizing this remedy must be interpreted in light of the draconian effect of rule 10(5)(b). That rule provides that a respondent whose answer has been struck is not entitled to participate in the case in any way. For example, in Kim v. Kim, 2001 CarswellOnt 502 (ONSC), on the basis of rule 10(5)(b), an uncontested hearing was held on custody, support and property without further notice to the party whose pleadings had been struck. Similarly, in Costabile v Costabile, 2004 CarswellOnt 4860 (ONSC), a party whose pleadings had been struck was not entitled to notice of further proceedings nor was he entitled to participate in any way."

[37] Where custody and access interests are involved, the court should avoid the sanction of striking pleadings or use utmost caution because trial courts need the participation of both parties and information that each can provide about best interests. A full evidentiary record, which involves the participation of both parties, is generally required to make a custody decision in the best interests of the children. See King v. Mongrain, 2009 ONCA 486, D.D. v. H.D., 2015 ONCA 2959, and Haunert-Faga v. Faga, 2005 ONCA 39324.

[38] Further, in Kovachis v. Kovachis, 2013 ONCA 663, the court held that on a motion to strike a party's pleadings in the family law case because of non-compliance with court orders, the court must consider whether the default is willful and whether striking the pleadings is the only appropriate remedy.

[39] The Court of Appeal has also stated that in exercising the discretion to strike pleadings, a court has the jurisdiction to order the reinstatement of pleadings on conditions. In Costabile v. Costabile, 2005 ONCA 6909, the court upheld the lower court's decision to strike the appellant's pleadings as the judge contemplated that the appellant would have the right to move to set aside the default and to try to persuade a family court judge that his disclosure and efforts in providing disclosure justified reinstating his pleading. The Court of Appeal opined that this was "a sensible resolution of the matter" and given the broad discretion under the Family Law Rules, the Court also held that a family court judge had jurisdiction to make such an order.

[40] Where financial disclosure orders are violated, courts have struck pleadings on financial issues and have permitted the parenting issues to continue. See: Sleiman v. Sleiman, 2002 ONCA 44930.

[41] Finally, before striking a pleading for failure to pay support, the court must consider a payor's financial circumstances and his or her ability to pay support. See Higgins v. Higgins, 2006 ONCA 33303. Courts have also given a party the opportunity to restore the pleading if arrears of support are paid. See Stein v. Stein, 2003 ONCA 2288; Roberts v. Roberts, 2015 ONCA 450.

Application of the Law to the Facts of this Case

[42] I am of the view that this case does not meet the very high threshold necessary to strike the father's pleadings. The father has made some financial disclosure during the course of his motion to change, albeit inadequate. The father has produced the following financial disclosure in accordance with the court order:

1. A recent updated and sworn Financial Statement;
2. His CRA notices of assessment for 2012, 2013, 2014, 2015 and 2016;
3. Information from his employer confirming his current rate of remuneration and employment;
4. Documentation including copy of the motor vehicle registration confirming that ownership that he does not own the motor vehicle as claimed by the mother;
5. Documentation confirming that the owner of the Maple property is Ms Ly Heng, the father's common law spouse's mother (this is confirmed by the applicant's title search of the property which does not indicate any transfer from the father, but that the common law spouse's mother has always owned the property);
6. Documentation from RBC confirming his account information, credit card and TFSA, valued at $708.86;
7. Letter from BMO confirming that the father does not have any chequing savings, or other accounts at BMO Bank of Montreal;
8. Letter from the mother of this youngest child confirming the amount of child support that the father voluntary pays her, in the amount of $200.00 per month.

[43] Further, the father has made a number of voluntary and court-ordered payments of child support towards the arrears and the ongoing child support under the temporary default order. He also made some payments of child support under the order at the time it was made, according to the most recent Statement of Arrears filed.

[44] The issue of access may also need to be addressed moving forward given that the father has not seen the child on a regular basis since 2015.

[45] I am further of the view that there is some merit in the father's motion to change and it is in the interest of justice to determine this case on its merits.

[46] The father's motion to change support is governed by subsection 37(2.1) of the Family Law Act which reads as follows:

Powers of court: child support

(2.1) In the case of an order for support of a child, if the court is satisfied that there has been a change in circumstances within the meaning of the child support guidelines or that evidence not available on the previous hearing has become available, the court may,

(a) discharge, vary or suspend a term of the order, prospectively or retroactively;

(b) relieve the respondent from the payment of part or all of the arrears or any interest due on them; and

(c) make any other order for the support of a child that the court could make on an application under section 33.

[47] The onus is on the father, the moving party, to prove the change in circumstances or that evidence not available on the previous hearing has become available, thereby justifying the change in the child support order.

[48] The mere accumulation of arrears without evidence of a past inability to pay is not a change in circumstances. Present inability to pay does not by itself justify a variation order. It should only be granted if the payor can also prove a future inability to pay. Otherwise, the option is to suspend, or order repayment of arrears. See: Haisman v. Haisman, 1994 ABCA 249. The court must determine whether the income imputed to the father in the existing order should continue.

[49] It is well settled law that, if income is imputed, then the issue will generally be res judicata on a motion to vary or change support. See: Bemrose v. Fetter, 2007 ONCA 637. Although the court always has discretion with respect to the issue of res judicata and can consider fraud, fresh evidence, additional disclosure or issues of fairness, the principle of res judicata provides that generally, a matter cannot be re-litigated once it has been determined on its merits.

[50] The court also has discretion under section 37(2.1)(a) of the Family Law Act to retroactively recalculate support based on the correct income information (as opposed to imputed income), once it has found that there has been a change in circumstances. Trembley v. Daley, 2012 ONCA 780. This is permitted by s. 37(2.1) of the Family Law Act.

[51] In Trang v. Trang, 2013 ONSC 1980 (the "Trang" decision), Justice Pazaratz discussed how courts should address support change motions when income was imputed to a payor in the original order as follows. The principles are summarized below:

51. When a court imputes income, that's a determination of a fact. It's not an estimate. It's not a guess. It's not a provisional order awaiting better disclosure, or further review. It's a determination that the court had to calculate a number, because it didn't feel it was appropriate to rely on -- or wait for -- representations from the payor.

52. A party who argues that an imputed income level is no longer appropriate must go beyond establishing their subsequent "declared" income. They must address why income had to be imputed in the first place. They must present evidence of changed circumstances which establish that either:

a. It is no longer necessary or appropriate to impute income. The payor's representations as to income should now be accepted, even if they weren't accepted before.

Or,

b. Even if income should still be imputed, changed circumstances suggest a different amount is more appropriate.

53. If "declared income" automatically prevailed on a motion to change support, it would defeat the purpose of imputing income in the first place. It might even be a disincentive for payors to participate in the initial court process. They could simply ignore support Applications -- as they often do. They could wait to see if the court imputes income, and how much. If dissatisfied with the amount, the payor could later return to court waving their tax returns, to suggest that the original judge got it wrong.

54. Support claimants should not be forced to go through this two-step process. Our family court system certainly can't afford it.

55. Similarly, the onus should not fall on the support recipient to establish why income should still be imputed on a motion to change. That determination has already been made. The onus is on the support payor to establish that there should be a change in the way their income is to be calculated.

56. If for example the original support order imputed income because the court concluded an unemployed payor should have been working, it would be illogical to allow the payor to extinguish that determination by returning on a motion to change, with proof that he wasn't working. That wouldn't constitute a change in circumstances.

57. If a trial judge imputed income to a self-employed person on the basis that their tax return didn't reflect cash sales and excessive write-offs, there should be a presumption that so long as the payor maintains the same business activities and accounting practices, subsequent tax returns will be equally unreliable.

58. Imputed income matters. The reason why income had to be imputed matters.

59. If an aggrieved party feels income was wrongly imputed, they can take timely steps to correct the original determination. They can appeal. They can bring a motion to set aside the order based on mistake or misrepresentation.

60. But if a payor proceeds by way of motion to change, they must face the presumption that the original order was correct -- and the original imputation of income was correct. If they want to rely on their declared income, they must establish why this time their representations should be accepted by the court.

[52] In this case, Ms Tsagaris, for the City of Toronto, reasonably conceded that it is unlikely that the father earned $104,000.00 at the time that the 2012 Order was made given the method of calculation. Further, according to the mother's CRA guidelines and the current CRA guidelines, the highest hourly rate for a drywalller is $34.00 per hour. Further the father is not licensed, registered, or a member of a union, although that may be his own choice.

[53] Further, since the Final 2012 Order, the father has had a third child and there is some evidence that he was not working for several months while he was without a license, triggering a change in his financial circumstances. We also have some evidence of more accurate or current income from the father's current employer. These changes in circumstances may warrant a review of the existing order, in accordance section 37(2.1) of the Family Law Act.

[54] The court has the discretion under section 37(2.1)(a) of the Family Law Act to retroactively recalculate support based on the correct income information (as opposed to imputed income), once it has found that there has been a change in circumstances. Trembley v. Daley, 2012 ONCA 780. This is permitted by s. 37(2.1) of the Family Law Act.

[55] In my view, given the credibility issues with some of the father's evidence, the father's motion to change could be resolved in a focused hearing with limited viva vice evidence of no more than 45 minutes for each party. However, before proceeding directly to a focused hearing, there will be a combined settlement conference/trial management conference before me as soon as possible with a view to settle this case.

Conclusion

[56] For the reasons set out above, the court makes the following order:

1. The mother's motion to strike the father's pleadings is dismissed;

2. The trial coordinator will contact the parties to schedule a settlement conference/trial management conference immediately with a view to settlement. In the event that the matter does not settle, then the father's motion to change will move to an immediate focused hearing.

[57] There shall be no order as to costs, which are reserved to the final resolution given the father's significant arrears of child support.

Released: April 17, 2018

Signed: Justice Sheilagh O'Connell