Ontario (Director, Family Responsibility Office) v. Knotek, 2025 ONCJ 97

ONTARIO COURT OF JUSTICE

DATE: 2025-02-20
COURT FILE No.: Chatham 134/17- E001

BETWEEN:
Ontario Director, Family Responsibility Office
Applicant

— AND —

Christopher John Knotek
Payor

Before Justice M. Vickerd
Heard on September 11, 2024
Reasons for Judgment released on February 20, 2025

Douglas D. Ferguson, counsel for the Director, Family Responsibility Office
Christopher John Knotek, on his own behalf

Overview

[1] The Family Responsibility Office (“FRO”) on behalf of the support recipient Amy Lynn Knotek advances a Default Hearing relating to enforcement of child support accruals consequential to the interim order of Justice M.J. Nolan dated October 21, 2013, and final order of Justice C. Bondy dated July 5, 2016. FRO’s evidence was presented in its pleadings including the Notice of Default Hearing and the FRO Directors’ Statement of Arrears sworn September 3, 2024. FRO seeks an order to fix the arrears of support, a confirmation of the ongoing monthly support to be paid, an order mandating payment in full and in the event of default of the payment, that the support payor be incarcerated and costs.

[2] The support payor Christopher John Knotek (“SPK”) testified on his own behalf. He also called upon his accountant Lawrence Gilhula to testify in support of his position. SPK’s pleadings included: Default Dispute dated October 30, 2023, Affidavit sworn April 23, 2024, Financial Statement sworn November 2, 2023, and supporting financial documents. SPK’s position is contained in his Default Dispute with the reason cited for his failure to pay support summarized in two words “financial hardship.”

[3] A summary of the history to this proceeding is the following:

1. The Default Hearing first returned to court on October 3, 2023. On that date, SPK was ordered to file his Default Dispute and financial statement with attachments. He was further ordered to file confirmation from REMAX Realty regarding his year to date gross and net incomes in 2023.

2. On December 5, 2023, it was confirmed that SPK had filed his Default Dispute and a Financial Statement. Matter was adjourned to facilitate settlement discussions and to allow SPK an opportunity to obtain legal advice concerning variation of the current order.

3. On February 5, 2024, it was endorsed by Justice R. Horton that SPK’s financial disclosure was not complete. SPK was ordered to serve and file his “2020, 2021 and 2022 tax returns and notice of assessment with all attachments,” last three pay statements received, his record of employment for last employment, details of his financial hardship claimed by Affidavit. He was ordered to produce these documents by March 1, 2024.

4. On March 15, 2024, it was noted that SPK had provided the financial disclosure “for the most part.” He was further ordered to provide the following disclosure:

• medical/professional/independent information about son’s medical condition.
• particulars of the dividend income/shares not disclosed in his Financial Statement but is income shown on his income tax returns.

5. On April 26, 2024, the Default Hearing was further adjourned as SPK advised that he was pursuing a Motion to Change concerning the child support order. He told the court on that date that the Superior Court of Justice Motion to Change had been prepared but not yet served. SPK was further ordered to serve and file:

• His personal 2023 income tax return and notice of assessment.
• His corporate income tax returns for the years 2021, 2022 and 2023 together with all attachments including any financial statements.

[4] The Default Hearing was convened on September 11, 2024.

Law and Analysis

Default Hearings - General

[5] Default Hearings are governed by the Family Responsibility and Support Arrears Enforcement Act, 1996, S.O. 1996, CHAPTER 3 (the “Act”). A Default Hearing is an enforcement mechanism available under the Act pursuant to section 41(1) which provides:

41 (1) When a support order that is filed in the Director’s office is in default, the Director may prepare a statement of the arrears and, by notice served on the payor together with the statement of arrears, may require the payor to deliver to the Director a financial statement and such proof of income as may be required by the regulations and to appear before the court to explain the default.

Presumptions

[6] There are presumptions found in section 41(9) which apply to a Default Hearing. This section provides:

Unless the contrary is shown, the payor shall be presumed to have the ability to pay the arrears and to make subsequent payments under the order, and the statement of arrears prepared and served by the Director shall be presumed to be correct as to arrears accruing while the order is filed in the Director’s office.

a. Statement of Arrears

[7] The starting presumption is that the Statement of Arrears prepared by the Director is correct regarding the arrears which accrued while the order was filed with the Director. In this matter, the most current Director’s Statement of Arrears was filed at the hearing. It is sworn September 3, 2024, and indicates a total child arrears accumulated of $28,358.32 and administrative fees of $1,200 for a total of $29,558.32. These arrears are calculated to span the period of May 1, 2014, to August 1, 2024.

[8] At the default hearing, SPK did not dispute the calculations contained in the Statement nor did he argue that it was improperly prepared.

[9] Despite representations by SPK in the course of this Default proceeding to support his requests to adjourn, the order was not varied. At the default hearing, SPK testified that his Motion to Change proceeding was served three days prior but no return date was fixed. Between April 2024 when he reported that his Motion to Change pleadings were complete, and the September default hearing, SPK had ample time to pursue his request to vary the outstanding child support order.

[10] Therefore, I find that on September 3, 2024, SPK owed child support arrears in the amount of $29,558.32.

b. Ability to Pay

[11] There a second presumption in subsection 41(9) is that the payor has the ability to pay the arrears and to make subsequent payments under the order. The onus is on the payor to show the contrary. These principles are well confirmed in much case law, including: Director, S.C.O.E. v. McLeod, [1991] ONCJ 6573 (ON CJ); Hanstke v. Hanstke (Dec. 12, 1989), unreported (Ont. Prov. Ct. (Fam.Div.)); Director, S.C.O.E. v. Sturges, 29 R.F.L. (3d) 299 (Ont.Ct.(Gen. Div.)); and Ontario (Director, F.S.P.) v. Pitcher, [1993] W.D.F.L. 262 (Ont. Prov.Ct.).

[12] The payor must satisfy the court that his inability to pay arises from "valid reasons" [ss. 41(10) FRSAEA]. A “valid reason” is an event or situation over which the payor has no control, which renders him totally without assets or income with which to meet his obligations, such as disabling illness or involuntary unemployment (Hargreaves v. Hargreaves, [1993] O.J No. 2522 (Ont.Sup.Jus.) (Q.L)). In Ontario (Director, Family Responsibility Office) v. De Francesco, [2012] O.J. 6338, Justice Carolyn Jones addresses the meaning of "valid reason" at paragraph 21 of her decision, writing that:

21 Valid reasons, within the meaning of s. 41(10) of the Act, imply reasons for which the payor cannot be faulted or for which the payor does not bear responsibility in the culpable sense. The court would expect some evidence of circumstances where, despite reasonable, diligent and legitimate efforts by the support payor to comply with the support order, the support payor has been unable to do so for reasons that are not connected with an unwillingness to pay, a lack of effort, a failure to prioritize the support obligation or a deliberate neglect, failure or avoidance on the part of the payor. Evidence relating to the past and present circumstances of the payor, including his financial circumstances since the time of the first default under the order, the manner in which he has applied his available income and assets, and his efforts to secure employment or income during the time that the arrears have arisen will have some bearing upon the determination of the legitimacy of the reasons the payor puts forward for his default under the support order. Circumstances that are beyond the control of the payor, resulting in the payor's inability to pay, would be valid reasons. An illness on the part of the payor, including a mental disorder, rendering the payor completely unable to work on either a full or part-time basis, as in the case before the court, would amount to a valid reason for the payor's failure to pay.

[13] In Ontario (Director, Family Responsibility Office) v. Labrash, [2002] OJ No 140, Justice Bishop held in order for a payor to argue that he is unable for a valid reason to pay the arrears, he must demonstrate that:

a) the circumstance giving rise to failure to pay is not voluntary.
b) he accepts his/her responsibility and places the interests of the child above his own; and
c) he has provided full, frank disclosure to the court.

[14] SPK argues that he cannot afford to pay the support. Initially in this default proceeding, SPK only disclosed that he is a realtor employed by REMAX Realty, Centre City. In his Financial Statement sworn, SPK showed no income. The lack of disclosure provided by SPK in his Financial Statement (Form 13) sworn November 2, 2023 is highly problematic for the following reasons:

• SPK indicates under “Part 1: Income” that he has no income. He discloses no benefits.
• At Part 3 of the Financial Statement concerning asset disclosure, SPK reveals no assets other than a notation of a bank account (institution not identified) with a balance of $6,400. He does not reveal any interests in any business or other money owe to him.
• At “Part 4: Debts,” SPK reveals no debts other than “unpaid support arrears.”
• At Schedule B of the Financial Statement, SPK confirms that he resides with his mother Mary Ann Knotek, but he does not complete the following sections concerning her income or financial contributions in the home.

[15] At the Default Hearing SPK confirmed that he resides with his mother and that she supports him. SPK characterized his mother as his “refuge.” At the same time, he acknowledged that he “helps out” sometimes but did not provide any details to this statement.

[16] After SPK produced his personal income tax returns pursuant to the Order of Justice R. Horton on February 5, 2024, it was learned that he has income from dividends. There was no dividend income disclosed in his Financial Statement. In SPK’s personal income tax returns, appended to his Financial Statement, the following is shown:

• 2020 Personal Income Tax Return reveals a total income of $19,395 comprised of $2,000 employment income; $9,500 employment insurance and other benefits; $8,510 from taxable dividends; and -$615 from self-employment income.
• 2021 Personal Income Tax Return reveals a total income of $19,535 comprised of $20,700 from taxable dividends and self-employment income of -$1,165.
• 2022 Personal Income Tax Return reveals a total income of $15,317.24 comprised of $21,850 from dividends and gross business income of $22,766 with a net self-employment income of -$6,532.

[17] On February 29, 2024, FRO’s counsel sent correspondence to SPK requesting detailed information about the dividend income. On March 15, 2024, Justice D. Austin ordered SPK to provide details of the dividends/shares which generate the income reflected in his income tax return. Subsequently, in an Affidavit sworn April 23, 2024, SPK appended his answers to counsel’s correspondence, providing the following information:

• his dividends are received from “Knotek Brothers Inc.”
• he owns 100% of the common share in this corporation.
• the dividends are calculated based on net income from his “real estate activities”
• the shares are not listed as assets in his financial statement because: “from 1998 to 2019 the company operated as a greenhouse. The business operated at loss for most of that time frame and after having accumulated a deficit of $2.8 million was forced by its creditors to sell all of its assets. Since that time, Mr. Knotek has used the corporation to operate a real estate business.”

[18] Further to that disclosure, an Order was made on April 26, 2024, obliging SPK to produce and file his corporate income tax returns for the years 2021, 2022 and 2023 together with all attachments, including business financial statements.

[19] SPK produced this disclosure with further prompting from FRO’s counsel on the day before the default hearing. So, in response to the order and the prompting of counsel, the balance sheets produced from “Knotek Brothers Inc” revealed the following:

For the period ending December 31, 2021:
a. The total assets were $795,106.64 comprised of $90,005.50 in a BMO account; $20,413.93 in an Agrinvest account; a GIC worth $662,943.34; accounts receivable totalling $1,835.30 and power equipment of $19,908.57 (net).
b. Under liabilities, there were accounts payable, a loan due to his mother in the amount of $503,441.95 and a loan owing to his brother Mark Knotek of $120,000. He further shows a vehicle loan owing of $27,692.9, among other liabilities.
c. In the Retained Earnings category, there is an entry of $274,891.01.

For the period ending December 31, 2022:
a. The total assets were $578,714.64 comprised of a GIC worth $562,943.34; accounts receivable totalling $1,835.30 and power equipment of $13,936 (net) and “buildings, machinery and..” of $15,771.64.
b. Under liabilities, there were accounts payable, a loan due to his mother in the amount of $314,775.97 and a loan owing to his brother Mark Knotek of $120,000. He further shows a vehicle loan owing of $12,97.55, among other liabilities.
c. In the Retained Earnings category, there is an entry of $252,818.01.

For the period ending December 31, 2023:
a. The total assets were $520,872.74 comprised of $337,976.03 in a BMO account; a GIC worth $182,896; accounts receivable totalling $1,835.30 and power equipment of $9,755.20 (net) and “buildings, machinery and ….” of $11,590.50 (net).
b. Under liabilities, there were accounts payable, a loan due to his mother in the amount of $255,651.47 and a loan owing to his brother Mark Knotek of $120,000.
c. In the Retained Earnings category, there is an entry of $239,167.

[20] The important conclusions arising from this evidence from the Corporation are:

• In the period of December 31, 2021, to December 31, 2023, SPK paid to his mother $247,790.48 against the loan.
• In the period of December 31, 2021, to December 31, 2023, SPK drew on his dividends.
• In the period of December 31, 2021, to December 31, 2023 SPK had retained earnings in his corporation totalling between $274,891 and $239,167.
• In the period of December 31, 2021, to December 31, 2023, SPK discharged his vehicle loan which had a balance in $27,692 at December 31, 2021.

[21] As noted by counsel at the default hearing, this late disclosure by SPK was “a revelation.”

[22] All of the revelations about assets, liabilities and disbursement of income from the corporation “Knotek Brothers Inc.” over the past three years, are to be considered in the context that SPK is the 100% shareholder for this company and has full discretion to direct its finances.

Preferred Creditors

[23] The balance sheets for SPK’s corporation “Knotek Brothers Inc” shows two debts owing to family members. One loan from his mother and the other loan from his brother Mark Knotek. SPK’s accountant Larry Gilhula testified on his behalf at the Default Hearing. At the outset Mr. Gilhula acknowledged that he and SPK have been lifelong friends and that Mr. Gilhula has been the family’s corporate accountant since 1992. His evidence was that these family debts arose from a joint greenhouse venture. The accountant confirmed that the greenhouse was operated as a corporation with three shareholders: SPK, his mother and his brother. Ultimately the corporation failed. There were many creditors arising from the failure of that business. It was the accountant’s evidence that the debts were largely satisfied except the remaining debt to SPK’s mother and brother.

[24] In defence of his failure to pay child support, SPK has claimed the debt to his mother as having his first priority. Mr. Gilhula advocated this view as well explaining that the debt to SPK’s mother is paid in priority to the child support as that debt to the mother existed before the support debt owing to FRO. I reject this argument as it is clear in the law that a payor must give first priority to child support before other debts (Creditors’ Relief Act, ss. 2(3)).

[25] Furthermore, the debt to SPK’s mother and brother have not been established as true debts—no documentation has been disclosed to confirm that these debts actually exist, the repayment schedule or other terms of these loans. There was no documentary evidence produced to confirm the existence of these loans from his mother and his brother. The mother and brother were not called upon to testify. Even if they were shown to be valid debts, they are subject to high scrutiny as they do not result from arms-length transactions. I have a concern that these debts could be manufactured for the purpose of siphoning income which could be used for child support purposes. Regardless, even if SPK truly owes this money to his mother and brother, it does not pre-empt his support obligations to his children.

Assets

[26] SPK’s failure to pay his child support is entirely within his control. He has the funds to pay this obligation for his children but has simply chosen not to do so. SPK has significant assets available to him in his corporation from which he could easily pay the arrears. For example, at December 31, 2023 the total funds in his “BMO account” and GIC totalled: $520,872.03.

[27] When Larry Gilhula testified on behalf of SPK, he confirmed that SPK’s assets could be applied to pay the entirety of all his debts including the debt to FRO for support arrears. Mr. Gilhula’s addendum statement was that to do so would be “all” that SPK has in savings.

[28] The total arrears of support owing at the time of the default hearing ($29,558.32) amount to less than 10% of SPK’s total liquid assets.

[29] A payor may be ordered to collapse or sell assets in order to pay arrears. For example, in FRO v. Chiang, the payor had almost $300,000 in RRSPs which the court noted that the payor had previously encroached on those savings to pay other debts. In that case, the court ordered the payor to pay $175,000 within 31 days or be incarcerated for 120 days (Ontario (Director, Family Responsibility Office) v. Chiang, 2014 ONCJ 85, [2014] OJ No 842).

[30] SPK can reasonably be expected to utilise his savings to satisfy the child support arrears. He had the financial means in liquid assets to satisfy the child support obligation throughout its entire accrual. His failure to do so to date lends to favouring the order requested by FRO at this juncture.

Failure to Discharge Onus

[31] Given the foregoing, I find that SPK has not discharged his onus to show that he does not have an ability to pay the child support arrears.

[32] SPK did not willingly provide a true picture of his financial circumstances. Initially he filed a sworn Financial Statement which was incredibly misleading. He showed no income, revealed no assets or interest in any corporation. He failed to file his income tax returns initially. It was only due to further investigation by FRO counsel, and in response to orders for disclosure made by the court, that the payor’s true financial circumstances were revealed showing that he has a corporation for which he is the sole shareholder containing significant assets. Disclosure of his financial circumstances was only made piecemeal and in response to particular orders. SPK has fooled no one and his behaviour in this regard was intentionally duplicitous. In this situation it is appropriate for me to draw an adverse inference against SPK for his failure to comply with his obligations for disclosure (Smith v. Pellegrini, [2008] O.J. No. 3616 (Ont. S.C.); Maimone v. Maimone, [2009] O.J. No. 2140 (Ont. S.C.); Isaya v. Ozo, 2022 ONCJ 321; Ontario (Director, Family Responsibility Office) v. Martinez, [2024] OJ No 5578).

[33] Furthermore, SPK deliberately delayed this proceeding. It was adjourned several times for him to bring a Motion to Change the support order. He requested an adjournment in December 2023 citing an intention to obtain legal advice about varying the current support order. In April 2024, he advised that a Motion to Change proceeding was prepared but not yet served. By September 2024, it appeared that he had only served the Motion to Change pleadings, and as such, the Default Hearing was convened.

[34] There is no evidence that reasonable, diligent and legitimate efforts were made by SPK to comply with the support order. All evidence at the hearing leads to a conclusion that the arrears accrued due to SPK’s unwillingness to pay, his failure to prioritize the support obligation, and a deliberate neglect of his financial obligations to his children.

[35] The evidence informs me that SPK is capable of discharging the full amount of the arrears of support, should he choose. He has the funds in BMO savings account and a GIC account. He has not provided any valid reason why he has not satisfied the arrears to date. Therefore, I conclude that SPK has no intention of paying his former spouse any child support if he can avoid it. Comments made by Justice Sherr in Ontario (Director, Family Responsibility Office) v. Martinez, [2024] OJ No 5578 have direct applicability to this matter:

The court's sympathies lie with the support recipient and the two children residing with her. They have not received a fair amount of support from the payor. The payor has badly failed them and has shirked his financial responsibilities.

[36] Given the foregoing, I find that SPK has not discharged his onus to prove that he is unable to pay the arrears for valid reasons.

Summary

[37] In considering the request made by the F.R.O., I note the following:

a. A final order was made by Justice C. Bondy of the Ontario Superior Court of Justice on July 5, 2016, obliging the SPK to pay ongoing child support to Amy Lynn Knotek for the benefit of the child Gabriel Christopher Knotek born November 5, 2003 and Jonah Marcus Knotek born December 27, 2006 in the amount of $1,089.00 per month based upon an imputed income of $73,877.96 commencing July 1, 2016 and not to be varied until June 30, 2021. There is no evidence that the order for child support has been varied.

b. An interim order was made by M.J. Justice Nolan on October 21, 2013, of the Ontario Superior Court of Justice obliging SPK to pay ongoing child support to Amy Lynn Knotek for the benefit of the child Gabriel Christopher Knotek born November 5, 2003 and Jonah Marcus Knotek born December 27, 2006 in the amount of $1,089.00 per month based upon an imputed income of $73,877.96 commencing October 1, 2013. The order was made subject to retroactive payment and adjustment.

c. The Director’s Statement of Arrears sworn September 3, 2024, shows total support arrears owing of $29,558.32.

d. The presumptions set out in section 41(1) of the Family Responsibility and Support Arrears Enforcement Act, 1996, apply in this case as there is no evidence to the contrary. More specifically, SPK has the ability to pay the arrears and to make subsequent payments under the order, and the statement of arrears prepared and served by the Director is correct as to arrears accruing while the order is filed in the Director’s office.

In summary, the financial hardship claimed by SPK is a fabrication and he has attempted to use the veil of his corporation to hide from his financial obligations to his children. The truth is that SPK has significant assets from which he draws to satisfy his obligations. He has chosen not to pay his child support resulting in the arrears which accrued.

Default Orders

[38] Section 41(10) of the Act outlines the types of orders available to a court once a determination has been made that default in payment has occurred without valid reasons. The powers of a court to make an order against a payor are found in clauses 41(10)(a) to (i).

[39] Where a payor has not wholly rebutted the presumption that he has the ability to pay the arrears and to make subsequent payments under the support order, the court ought to order that the payor make appropriate periodic and/or lump sum payments towards the arrears and pay the ongoing support obligation as it comes due (clause 41(10)(a) or (b) of the Act). A committal term in the event of default of payment ought to be included in most cases (clause 41(10)(h) or (i) of the Act). Without a committal term, the Director has no recourse under the order, if the payor fails to make the payments ordered.

[40] In this matter, FRO requests that the default order include terms relating to a lump sum payment of the arrears, an obligation to continue to pay the ongoing child support and in the event of a default of either payment, that SPK be committed to imprisonment. Reasonably, FRO does not seek immediate incarceration for SPK due to his failure to pay to date but seeks a term of incarceration as an enforcement mechanism in the event that SPK does not satisfy the arrears within a fixed number of days. I find this approach to be warranted and reasonable in the circumstances.

[41] In FRO v. Hennessy, 2022 ONSC 2594, Justice Bale listed a non-exhaustive set of factors to be considered before ordering imprisonment. With an application of those factors to the current proceeding, I find that SPK:

a) has a very poor payment history. Significant arrears have accumulated.
b) has only paid support when compelled to do so in enforcement proceedings. Even then, he has found ways to delay enforcement.
c) has historically failed to provide complete, timely or accurate financial disclosure.
d) has prioritized his own interests over his support obligations.
e) did not proceed with the extended opportunity provided to him to bring a Motion to Change the current support order.
f) has prioritized other expenditures over compliance with the support order. His assets confirm an ability to pay the arrears in full. His non-payment of the arrears is willful and deliberate.

[42] I find that SPK will avoid paying support until the consequences are such that compliance is the preferred option. The order this court makes must have serious and clear consequences to be effective and to achieve long-awaited justice for the support recipient and the two children. This is an appropriate case to impose the last resort of imprisonment.

[43] Therefore, I accept the Director's position that a committal term should be attached to any payment order and an immediate committal order is warranted in these circumstances.

Costs

[44] Given SPK’s bad faith in disclosure of his particular financial circumstances and the delay which he caused to the resolution of this proceeding, an order for costs is warranted. FRO shall receive its costs of the hearing as claimed.

Order

Given the foregoing, pursuant to section 41(10) of the Family Responsibility and Support Arrears Enforcement Act, a final Order is made as follows:

1. A finding is made that as of September 3, 2024, the Respondent support payor Christopher John Knotek owes support arrears of $29,558.32 and has the ability to pay these arrears.

2. The Respondent support payor Christopher John Knotek shall pay these arrears in full on or before 4:00 p.m. on March 14, 2025.

3. In default of the payment referred to in paragraph 2 above, the Respondent support payor Christopher John Knotek shall be incarcerated for a period of thirty (30) days.

4. Commencing March 1, 2025, the Respondent support payor Christopher John Knotek shall pay the ongoing monthly support of $849.00 pursuant to the final Order of Justice C. Bondy of the Superior Court of Justice dated July 5, 2016 until that order is varied.

5. For each and every default of the support payment referred to in paragraph 4 above, the Respondent support payor Christopher John Knotek shall be incarcerated for a period of three days.

6. In the event of default of any payment due herein, the Director, Family Responsibility Office shall be at liberty to bring any future motion for a warrant of committal based upon paragraphs 2 and 4 with further notice to the Respondent support payor Christopher John Knotek by special service as provided for in Family Law Rule 6(3);

7. The Respondent support payor Christopher John Knotek shall notify the Director, Family Responsibility Office in writing of any change in address or employment within ten days of any such change and shall provide particulars of the change.

8. This order shall be served upon the Respondent support payor Christopher John Knotek by regular mail at the address and by email at the addresses confirmed on his Affidavit sworn April 23, 2024.

9. Approval of this Order as to form and content is waived.

10. Costs of this proceeding are fixed at $1,000 inclusive of any disbursements and HST payable by the Respondent support payor Christopher John Knotek to the Director, Family Responsibility Office forthwith.

Released: February 20, 2025
Signed: Justice M. Vickerd