Court File and Parties

Court File No.: FS-13-390624 Date: 2017-02-22 Ontario Superior Court of Justice

Between:

GALINA PSAVKA Applicant – and – ROBERT KROLL Respondent

Counsel: Ken Younie, for the Applicant Brian Ludmer, for the Respondent

Heard: December 15, 2016

Reasons for Decision

HARVISON YOUNG J.

[1] This long motion was brought by the applicant wife, Galina Psavka. She seeks interim child and spousal support, and asks that the respondent Robert Kroll’s income for support purposes be set at $450,000 on a without prejudice basis. She also asks that Mr. Kroll be declared a vexatious litigant.

[2] In his cross-motion, Mr. Kroll seeks imputation of income to Ms. Psavka, as well as disclosure and outstanding undertakings from her. At the outset of the motion he asked for an adjournment of this motion on the basis that the issues relating to determination of quantum of support could not be adjudicated, even on an interim basis, without this.

[3] By the time this motion was heard on December 15, 2016, Ms. Psavka had brought a motion to strike Mr. Kroll’s pleadings for failure to comply with several court orders (including the provision of a valuation, to attend for questioning and to provide key disclosure). In the alternative she sought an order restraining Mr. Kroll from taking any further steps in this matter until he has complied with all outstanding court orders.

[4] In addition, she sought an order declaring Mr. Kroll to be a vexatious litigant pursuant to s. 140 of the Courts of Justice Act. In the further alternative, she sought a motion restraining Mr. Kroll from bringing any further motions in this proceeding without the leave of the court pursuant to Rule 14(2) of the Family Law Rules.

[5] Mr. Kroll filed a motion seeking “costs” that he has incurred in these proceedings. The motion for costs does not constitute a valid claim except to the extent that Mr. Kroll seeks legal costs consequent to a proceeding pursuant to the rules. There is no need for a separate motion and as such that motion is dismissed without prejudice to Mr. Kroll make submissions as to costs in the normal course.

[6] By endorsement dated December 15, 2016, I adjourned the motions (other than the interim support motion and Mr. Kroll’s motion for “costs” which are disposed of in these reasons) to a date to be arranged by teleconference with me and counsel. This teleconference shall be scheduled within one week following the release of these reasons. I also ordered that neither party bring any other motions in the meantime without the leave of the court.

[7] I declined to grant the adjournment of the interim support motion as requested by Mr. Kroll. I find that any failure to disclose on the part of the applicant wife has not been material. She has appeared for questioning and answered the lion’s share of undertakings given. She has returned to work as a real estate agent with some success. Earlier in 2016, she estimated that her commissions would be in the neighborhood of $200,000 for the year, and evidence before the court on this motion indicates that this estimate appears to have been accurate. On the other hand, the respondent husband has not appeared for questioning in the face of clear court-ordered timelines and has yet to provide the information necessary for the valuation of his income that was ordered by Frank J. on January 17, 2014- some 3 years ago.

[8] There is ample evidence before the court as to the applicant wife’s income and circumstances to address the interim determination of her income for s. 7 and spousal support purposes.

[9] I note that Mr. Kroll is self-represented in that he has no lawyer on the record. He has, however, had the benefit of Mr. Brian Ludmer’s assistance and appearance at most of the court appearances.

[10] This is a very high conflict matter. At this stage, there have been more than 10 court appearances and endorsements. A brief summary of the background will suffice for the purposes of this motion. The parties were married on November 26, 1995. They have two children, namely Rachel Beth Kroll born December 26, 1998 (age 17) and Maxwell Adam Kroll, born March 16, 2005, (age 13).

[11] The parties lived an affluent lifestyle during their marriage. They lived in an exclusive area near Bayview and York Mills Road in Toronto, employed a live-in housekeeper, and drove expensive vehicles. They ate out regularly, traveled often, and enrolled the children in expensive camps and activities. Mr. Kroll is a successful real estate agent and has been throughout. Ms. Psavka was a stay at home mother during most of the marriage and has recently returned to work as a real estate agent, with some success.

Interim Support

[12] By consent order of Mesbur J. dated April 10, 2014, Mr. Kroll was ordered to pay undifferentiated support to Ms. Psavka in the amount of $4,000.00 per month. This order was made just a few months after Frank J.’s order dated January 17, 2014 providing a timeline for the completion of a valuation of Mr. Kroll’s income. As I have already noted, that has yet to happen.

[13] The payment of the interim amount of $4000.00 per month has not been consistently made when due and has presented significant difficulties for Ms. Psavka. In her notice of motion Ms. Psavka sought an order striking Mr. Kroll’s pleadings on this basis. In the alternative, she sought an order that his pleadings be struck unless he paid the (then due) amounts and all further amounts when due. By the time the motion was heard on December 15, 2016, Mr. Kroll was up to date and the motion to strike was adjourned.

[14] The central and immediate issue is the determination of the respondent’s income for support purposes. The parties separated on September 24, 2012, although they tried to reconcile briefly after that. The final separation took place on October 15, 2013. The matter has been high conflict since then, although the parties did reach an agreement on equalization and the matrimonial home was sold. An agreement to a mediation-arbitration before Mr. Herschel Fogelman ended after he agreed to Mr. Kroll’s motion to recuse himself, “due to the ongoing and escalating nature of Mr. Kroll’s challenges”.

Mr. Kroll’s income

[15] The wife asks that the husband’s income for support purposes be set at $450,000. Mr. Kroll asks that it be set at $200,000. He claims that his income, entirely from commissions earned as a real estate agent, has dropped since the separation in 2012.

[16] The wife’s evidence is that Mr. Kroll has been one of the top REMAX agents in Toronto. The REMAX website indicates that he has been a his profile on the REMAX website shows that he was awarded the Chairman’s Club award in each year from 2011 to 2015. The Chairman’s Club Award, according to Ms. Psavka, is given to realtors whose paid commissions in a given year total between $500,000 and $1,000,000.

[17] Mr. Kroll blames Ms. Psavka for the fact that there is, as yet, no income valuation from him. However, while she has been simply bombarded with paper, motions and costly court appearances, the simple requirement of provision of an income report has not been completed. On the basis of an examination of his tax returns, Mr. Penner of Marmer Penner, Ms. Psavka’s expert, had questions about Mr. Kroll’s expenses. The order required that the two experts get together and attempt to agree, or that a report be produced. No report has been forthcoming. Rather, Mr. Kroll asserts that his income as a real estate agent has fallen within the last few years, but has failed to attend for questioning. Myers J., in his endorsement refusing the parties’ adjournment request on August 23, 2016 before him, addressed Mr. Kroll’s assertion as to his income as follows:

Mr. Kroll has disclosed tax returns and back up purporting to establish a huge decrease in his income as a senior, seasoned realtor during the longest sustained bull market in Toronto history. I don’t know if he has funnelled revenue to an undisclosed corporation or through a cooperative colleague. Until he is cross-examined and his affairs investigated upside and down, I do not begin to believe his current income figures. His conduct in this proceeding and mediation is bordering on vexatious.

[18] There is no plausible explanation before the court to explain how an agent as successful as Mr. Kroll could do as poorly as he claims to have done since 2012, while being recognized as a top agent in a record-breaking hot market. This is rendered even more incredulous in light of the fact that Ms. Psavka, an agent who had been out of the business for many years, earned roughly $200,000 in commissions in 2016.

[19] In addition, it is important to underline the principles applicable to an interim motion for spousal support as set out in Driscoll v. Driscoll, 2009 CarswellOnt 7393, 182 A.C.W.S. (3d) 713 [Driscoll], citing Robles v. Kuhn, 2009 BCSC 1163 (B.C. Master). The principles are:

1. On applications for interim support the applicant's needs and the respondent's ability to pay assume greater significance;
2. An interim support order should be sufficient to allow the applicant to continue living at the same standard of living enjoyed prior to separation if the payor’s ability to pay warrants it;
3. On interim support applications the court does not embark on an in-depth analysis of the parties' circumstances which is better left to trial. The court achieves rough justice at best;
4. The courts should not unduly emphasize any one of the statutory considerations above others;
5. On interim applications the need to achieve economic self-sufficiency is often of less significance;
6. Interim support should be ordered within the range suggested by the Spousal Support Advisory Guidelines unless exceptional circumstances indicate otherwise;
7. Interim support should only be ordered where it can be said a prima facie case for entitlement has been made out;
8. Where there is a need to resolve contested issues of fact, especially those connected with a threshold issue, such as entitlement, it becomes less advisable to order interim support.

[20] It is difficult to overstate the importance of the disclosure obligation upon spouses in the course of such a proceeding. It is trite law that the parties are obligated to satisfy the court as to their income. On the facts before the court, that obligation falls primarily upon Mr. Kroll. For her part, Ms. Psavka has produced her income tax returns and advises that, having returned to work as a real estate agent with some success, her 2016 income will be in the neighborhood of $200,000. Before their separation, Ms. Psavka was not working outside the home, although her tax return shows an annual line 150 income which she testified she was paid by Mr. Kroll as an income splitting device. She also stated that as a result of this income splitting strategy, she was left with a bill from CRA for over $70,000.

[21] The disclosure obligation has repeatedly been made clear in the case law: see Roberts v. Roberts, 2015 ONCA 450, at paras. 11–13; Chernyakhovsky v. Chernyakhovsky, [2005] O.J. No. 944, at para. 6. In Manchanda v. Thethi, 2016 ONSC 3776, at para. 1, aff’d 2016 ONCA 909, Myers J. noted: “It has been clear for over 15 years that financial disclosure - early, voluntary, and complete financial disclosure - provides the factual foundation for the resolution of financial issues in family law proceedings.” This obligation also applies to self-employed individuals: Blaney v. Blaney, 2012 ONSC 1777, at para. 5; Whelan v. O’Connor, [2006] O.J. No. 1660, at para. 13.

[22] Under s. 21 of the Federal Child Support Guidelines, both parties must provide personal income tax returns and notices of assessment and reassessment for the previous three taxation years. Section 19(2) of the Guidelines, meanwhile, permits the court to impute income in appropriate circumstances. Such circumstances include: intentional unemployment or underemployment, failure to provide income information when under a legal obligation to do so, and when a significant portion of income is derived from dividends, capital gains, or other sources that are taxed at a lower rate than employment or business income or that are exempt from tax. Previous jurisprudence confirms the broad judicial discretion to impute income for support purposes when full financial disclosure is not made: Tillmanns v. Tillmanns, 2014 ONSC 6773, 246 A.C.W.S. (3d) 639, at para. 64; Menegaldo v. Menegaldo, 2012 ONSC 2915, 215 A.C.W.S. (3d) 705, at para. 74.

[23] There is no question that the legislation and the case law establish that income for support purposes is presumptively the payor’s income as it appears on line 150 of the individual’s tax return: Bak v. Dobell, 2007 ONCA 304, at para. 30 [Bak]; Federal Child Support Guidelines, SOR/97-175, s. 16. That amount, however, simply makes no sense in this case in light of Mr. Kroll’s historical earnings as a top real estate and the fact, as noted by Myers J., that the real estate market in Toronto has been very active over the past few years. His claim that his income has dropped is further undermined by the fact that Ms. Psavka managed to earn roughly $200,000 in commissions in 2016 which was her first year back in the business after being a stay at home mother for many years.

[24] I do not accept Mr. Kroll’s assertions as to his income for a number of reasons. First, he has failed to value his income. I agree with Mr. Younie’s submission that, if he had cooperated with Marmer Penner in 2014 so that the report could be completed, this motion would not have been necessary. Second, according to his statement, his gross commissions have declined since the separation. As Myers J. noted in his August 23, 2016 endorsement, this decline has taken place during the longest bull real estate market in Toronto on record. Moreover, it is during the same market that, during the last year, Ms. Psavka has been able to achieve significant success despite having been out of the business for many years.

[25] Mr. Kroll has not appeared for questioning despite court orders. He states that there are reasons for income drops, indicating that there is more competition resulting in reduced commissions, and the multiple bid situation means more wasted and uncompensated time. This might well turn out to be accepted by a trial judge after complete disclosure and compliance with orders such as producing an income valuation and appearing for questioning.

[26] Moreover, I do not accept Mr. Kroll’s argument that the fault lies with Ms. Psavka. While her disclosure may not have been perfect, the core of the issues at this interim stage is Mr. Kroll’s income. She may not have managed her resources effectively but this does not affect her entitlement or her need as established by the lifestyle during the marriage at this interim stage of the proceedings. She has submitted an updated financial statement and, unlike Mr. Kroll, attended questioning and answered the vast majority of her undertakings. Mr. Ludmer, on Mr. Kroll’s behalf, spent considerable time during the hearing criticizing Ms. Psavka’s disclosure. I find that it was not materially deficient for the purposes of this motion on support.

[27] On behalf of Mr. Kroll, Mr. Ludmer emphasized that there must be an evidentiary basis upon which the court can impute income. I agree. However, I find that there is such a basis in the present case.

[28] First, there is Mr. Kroll’s income since the separation. There is no reliable evidence other than his bald assertion that his income from commissions has dropped since 2012. I do not, in the circumstances, where he has neither appeared for questioning nor produced a proper valuation report, accept the evidence of Cameron Forbes, General Manager for RE/MAX dated September 14, 2016 that Mr. Kroll’s T4A issued by RE/MAX is his entire income.

[29] Second, the letter from Marmer Penner in 2014 flagged expenses as a concern that may have artificially lowered his line 150 income. This cannot be assessed with any accuracy at this point because the income report has yet to be completed. However, there is a significant management fee paid to Mr. Kroll’s mother which Ms. Psavka submits is a form of income splitting on the basis that she was paid certain amounts for the same reason during the marriage. There are management and administration fees listed in his tax returns in the amount of about $60,000 each year, but as there has been neither questioning nor the completion of a report, there is no way of reliably assessing these expenses.

[30] Nor do I accept the assertion that expenses are “generally” in the range of 40%. Even assuming that such percentages are valid for the purposes of income tax, it does not follow that they are all legitimate expenses for the purposes of determining his income for support purposes. In any event, his recent tax returns indicate that his line 150 income has increased in the past few years. There is also evidence that Mr. Kroll issued a T4 to the parties’ housekeeper in 2013 although Ms. Psavka claims that she is the one who paid her. In short, it is not possible to determine with any precision in the absence of a valuation report what expenses should be added back to Mr. Kroll’s income. I am, however, satisfied that some amount should be.

[31] Most significantly, however, is the fact that Mr. Kroll has failed to attend for questioning in the face of clear court orders setting out the time lines for doing so, and has failed to provide some key disclosure in the form of bank and credit card statements from 2014 to the present. This is key information for the determination of his income for the purposes of interim support.

[32] Having reviewed Mr. Kroll’s line 150 income over the years both before and after separation, I note that the common denominator is that the line 150 income even before the parties’ separation could not have begun to support the family’s lifestyle. For example, in 2010, his line 150 income was $57,018.47. His gross commissions were reported to be $479,569.19 and his business expenses claimed were $359,569.19.his gross reported income was $479,218.56. In 2011, the gross commissions were $741,332.47 and the expenses claimed were $534,126.16 for a line 150 income of $117,239.65. Even if the family was living significantly beyond its means, these amounts do not make sense.

[33] Despite longstanding orders, Mr. Kroll did not submit his most recent tax return information until December 13, 2016. This shows that his line 150 income has actually increased in the past few years. In 2015, Mr. Kroll’s line 150 income was reported to be approximately $253,643. However, he claimed business expenses in the amount of $193,000 and had claimed to have received about $449,116.93 in commissions. In 2014, his line 150 income as reported was $156,992 but he had claimed business expenses totaling $181,204.33 for a gross income of roughly $335,771.00. In 2013, he reported gross commissions in the amount of $554,435.64 and total business expenses in the amount of $290,492.48 for a line 150 income of approximately $363,943.16. While it is impossible to make a precise assessment, I am satisfied for the purposes of this interim determination that a proportion of these expenses must be added back to Mr. Kroll’s line 150 income. In any event, and as Myers J. noted, his tax return information cannot be accepted as reflecting all of his income in these circumstances where he has failed to attend for cross examination, to produce his recent bank statements and credit card information, or to provide an income valuation.

[34] In the absence of complete and reliable information, I find that the best assessment of his current income available for support is $375,000 based on his past income, standard of living and his and his reported living expenses. This is for interim support purposes and is without prejudice to whatever final amounts might be determined at trial or by the agreement of the parties.

Child Support

[35] Mr. Kroll was ordered (on consent) to pay undifferentiated support in the amount of $4,000 in April 10, 2014. As of December 15, 2016, this amount was paid except for an amount of $525 which he was withholding on the basis of his claim that this amount should have been contributed by Ms. Psavka to Rachel’s registration costs for university.

[36] On the basis of Mr. Kroll’s income in the amount of $375,000 as I have determined, the table amount of child support is $4,577 per month for the two children of the marriage. This amount shall be payable retroactive to July 29, 2016 when this motion was brought and it without prejudice to any determinations made at trial or by the agreement of the parties.

[37] On the evidence before me at the motion, Ms. Psavka’s commission income for 2016 up to the end of November was $206,212.50 with a net income after expenses of $183,351. This amounts to a net income over 12 months of just over $200,000. I note in passing that the proportion of expenses(just under $22,861)that she reports are dramatically less than those claimed by Mr. Kroll. For purposes of interim spousal support, which I will discuss below, and s. 7 expenses, I determine that her 2016 income for support purposes is $200,000.

[38] Section 7 expenses are to be divided proportionately to the incomes of the parties as I have found them. This will apply to university expenses such as tuition as well as any other applicable s. 7 expenses and is retroactive to the date that this motion was brought on July 29, 2016.

Spousal Support

[39] There is no question of the entitlement of Ms. Psavka to spousal support on both compensatory and non-compensatory grounds. She stayed home to care for the children and the family for most of the 16 year marriage. While, to her credit, she is re-entering the work force with some success, her income to date has been significantly less than that of Mr. Kroll’s In 2013, she reported gross commission income in the amount of $31,980; in 2014 it was $17,800 and, as I have indicated, her gross commission income for 2016 was approximately $200,000. As these amounts show, it is taking her some time to get back on her feet. She has suffered financially over the last few years which she submits is the result of the lack of adequate support from Mr. Kroll, as well as having been saddled from a CRA bill for more than $70,000 as a result of income splitting with Mr. Kroll during the last part of the marriage. I am satisfied that she has demonstrated need for spousal support. In these circumstances, the quantum and duration of support will be an issue for trial or the final resolution of this matter but in the meantime she is entitled to spousal support on an ongoing basis on a without prejudice basis.

Quantum of interim spousal support

[40] As I have indicated above, I would attribute annual income to Ms. Psavka for interim purposes of this motion at $200,000 for the purposes of this motion. This is without prejudice to any amounts found at trial or by the agreement of the parties.

[41] The Spousal Support Advisory Guidelines provide that the low, mid and high levels of spousal support would be $456.00, $1,786.00, and $4,577.00 respectively. I find that the low level is appropriate in this case because Ms. Psavka is earning an income and given that she has only recently resumed working in the real estate business, it would seem that she is likely to be able to increase her income.

Conclusion on support

[42] For the foregoing reasons, orders shall issue as follows:

1. Interim child support is payable in the amount of $4,577 by the respondent father per month for the two children of the marriage based on an annual income imputed to the father in the amount of $375.000, retroactive to July 29, 2016;
2. Interim spousal support is payable in the amount of $456.00 per month, retroactive to July 29, 2016;
3. Section 7 expenses for the children are to be shared proportionately to the parties’ income as I have determined it above;
4. All of the above is without prejudice to any determinations that might be made at trial or by the agreement of the parties.
5. Counsel shall, within a week, arrange a teleconference with me for the scheduling of the remaining motions.

Costs

If the parties are unable to agree as to the costs of the support motion, they may file submissions of no more than 3 pages each along with their bills of costs, with the applicant to file her submissions within 30 days after the release of these reasons and the respondent to file his within 14 days thereafter. The applicant, if necessary, may file a reply of no more than 1 page within 7 days thereafter.

Harvison Young J.

Released: February 22, 2017