COURT FILE NO.: FC-19-1117-00 DATE: 20200123 SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Holly Ann Rushton, Applicant AND: Cody Sheldon Cuff, Respondent
BEFORE: McDermot J.
COUNSEL: S. Nadine Finbow, for the Applicant Mary Anne Cummings, for the Respondent
HEARD: January 9, 2020
Endorsement
Introduction
[1] This is a motion for temporary spousal support brought by the Respondent, Cody Cuff.
[2] These parties have been together since high school. They are young; Mr. Cuff is 34 years old and Ms. Rushton 35. Mr. Cuff moved in with the parents of the Applicant, Holly Rushton, after leaving his home at age 15 because of parental conflict. Subsequently, Ms. Rushton went off to university while Mr. Cuff remained in her parent’s home. Depending upon who you listen to, cohabitation began when Mr. Cuff moved to Ms. Rushton’s parent’s residence in 2001, or when Ms. Rushton returned from university after having obtained a degree in 2005. The parties also disagree on when they separated, either on August 1, 2018 when Ms. Rushton moved out of the common residence or in June, 2019 when the parties “formally separated”. [1]
Issues – Income of the Parties
[3] Whenever the parties separated, they cohabited for a significant period of time, and Ms. Rushton’s income is significantly higher than that of Mr. Cuff. The disagreement is not as to Mr. Cuff’s entitlement to spousal support; it is the amount of support payable.
[4] This difference in position arises from the occupations of the parties.
[5] These parties were part of the “new economy”. Traditionally, an individual is paid according to the wealth that he or she produces through his employment or efforts. The amount of pay received is generally commensurate with the wealth or benefit produced.
[6] Not apparently so with these parties. Although I knew where the money came from, it was difficult for me to understand exactly how the income was made, or what these parties had to do with any product or service that had been produced through their efforts. However, from argument and the materials provided, it appears that the financial situation concerning these parties as of April, 2019, when the parties extricated themselves from each other, the situation was as follows:
a. The parties are joint shareholders in a company registered as 8470928 Canada Inc. (“847”). They have in the past, and continue to share income from that business equally, which has been paid as dividend income. Throughout, 847 has been managed by Mr. Cuff, who is the sole director and officer of the company.
b. The sole income of that company arises from shares that 847 holds in a company called BC Software Licensing Ltd. (“BC”). Dividends from that company are paid to 847 which then flow through to the parties. The dividends total about $100,000 per annum with the parties receiving about $50,000 apiece.
c. Mr. Cuff acknowledges that he controls the dividends that have been paid to 847 “as the sole director” of that company. [2] The parties disagree as to whether these dividends have been actually paid to the parties equally; Mr. Cuff says that the dividends have been used to pay taxes and to maintain joint debts and obligations (including the rent for the common residence in which Mr. Cuff still resides and which was leased by both parties) but Ms. Rushton complains that Mr. Cuff has traditionally benefitted from those dividends to a much greater extent than has she.
d. BC is operated by Patrick Stacey, who is the Applicant’s brother-in-law. In addition to the dividend income from BC, Ms. Rushton is employed by BC as “Head of Licensee Operator Support”, earning a base income of $77,388.00 USD. She further earns 2% BC’s yearly profit which was quantified as $37,000 USD in 2019. [3] What Ms. Rushton’s position entailed was unclear although Mr. Cuff said that she did very little to earn this income. [4]
e. Although there may have been no legal basis for doing so (Mr. Cuff had no basis for receiving this income as this was employment income, and Mr. Cuff was not an employee of BC), the Applicant’s base salary was split equally between the parties, and each party declared their equal share of the income on their respective T1 Income Tax Returns. In his materials, Mr. Cuff describes this income as partnership income paid to an entity called Partini, but based upon the correspondence from BC, it appears to have been income from employment paid to Ms. Rushton.
f. The 2% profit share was not formally divided between the parties. It was paid into an account in the Cayman Islands and the parties did not take money out of that account unless they needed it as a withdrawal would mean that those funds would have to be declared for income tax purposes. The parties did go down to the Cayman Islands from time to time and withdrew funds from that account if they needed them. The parties have agreed that this account, called the “The Fund”, would be frozen by order of the Cayman Island courts pending the outcome of this litigation.
g. On April 29, 2019, Ms. Rushton took steps to have her salary “sent directly to me as opposed to somewhere that you solely control.” She sent an email to Mr. Cuff stating this and that, “you can understand why.” [5] Since then, the only income that Mr. Cuff has received is his share of the dividend income earned through 847 although it is unclear as to what has been distributed to the parties.
[7] Ms. Rushton was concerned about the dividends paid to 847 and Mr. Cuff’s control of 847. She brought an ex parte motion in Superior Court to address this, and on June 4, 2019, Charney J. ordered that Mr. Cuff be restrained from conducting business through 847 and that Ms. Rushton be appointed a director of the company. That order was later set aside on consent by order of DiTomaso J. dated June 11, 2019 and the matter was traversed to Family Court. DiTomaso J. further ordered mediation and that the funds paid to 847 only be used in the “ordinary course of business and in accordance with the historical practice of the parties including payment of joint expenses and other expenses from the account.” From that point onward, assuming the order has been obeyed, neither party has benefited from the dividend income from BC although Mr. Cuff says that he has used the money for his basic expenses.
[8] On October 3, 2019, Boswell J. ordered the civil proceedings consolidated with these family law proceedings.
[9] Mediation failed, and the parties proceeded to a case conference on October 8, 2019 before Mulligan J. The parties agreed to disclosure by the Applicant, return of personal property and the elimination of one of the family debts by turning in the Cadillac Escalade. They divided up some personal property. They also agreed to retain Julie Ford to provide recommendations to restructure 847 in order to equalize the assets of that company and to abide by those recommendations. According to Mr. Cuff, nothing was done to retain Julie Ford.
[10] This motion for spousal support has been brought by the Respondent. He wishes the equalization of the Applicant’s income from BC to continue and states that is only fair considering the joint venture of the parties. He suggests that the income of the Applicant is founded upon joint venture income and not the work performed by the Applicant for BC which he says is minimal. He suggests that the status quo income share terminated by the Applicant in April, 2019 should be reinstated.
[11] Notwithstanding the terms of the order of Mulligan J., which permitted a motion for spousal support retroactive to June, 2019, Ms. Cummings advises that her client is not pursuing retroactive spousal support at this time.
[12] Ms. Rushton does not deny that the Respondent is entitled to spousal support, although she says that this is, if anything, a non-compensatory claim for support. She says that the Respondent has done nothing to obtain employment and that some income, at least on a minimum wage basis, be imputed to Mr. Cuff. She says that there is no reason to depart from the Spousal Support Advisory Guidelines (the “SSAGs”) and that spousal support should be limited to the mid to lower range under those guidelines.
Disposition
[13] For the reasons set out below, I have determined that the Applicant shall pay the Respondent temporary spousal support in a monthly amount of $2,000.
Analysis
[14] These parties were never married and the spousal support issues are therefore governed by the provisions of Part III of the Family Law Act (the “FLA”).
[15] Sections 30 and 33(8) and (9) of the FLA concern claims for spousal support, including temporary spousal support:
- Every spouse has an obligation to provide support for himself or herself and for the other spouse, in accordance with need, to the extent that he or she is capable of doing so.
33(8) An order for the support of a spouse should,
(a) recognize the spouse’s contribution to the relationship and the economic consequences of the relationship for the spouse;
(b) share the economic burden of child support equitably;
(c) make fair provision to assist the spouse to become able to contribute to his or her own support; and
(d) relieve financial hardship, if this has not been done by orders under Parts I (Family Property) and II (Matrimonial Home).
(9) In determining the amount and duration, if any, of support for a spouse or parent in relation to need, the court shall consider all the circumstances of the parties, including,
(a) the dependant’s and respondent’s current assets and means;
(b) the assets and means that the dependant and respondent are likely to have in the future;
(c) the dependant’s capacity to contribute to his or her own support;
(d) the respondent’s capacity to provide support;
(e) the dependant’s and respondent’s age and physical and mental health;
(f) the dependant’s needs, in determining which the court shall have regard to the accustomed standard of living while the parties resided together;
(g) the measures available for the dependant to become able to provide for his or her own support and the length of time and cost involved to enable the dependant to take those measures;
(h) any legal obligation of the respondent or dependant to provide support for another person;
(i) the desirability of the dependant or respondent remaining at home to care for a child;
(j) a contribution by the dependant to the realization of the respondent’s career potential;
(k) Repealed: 1997, c. 20, s. 3 (3).
(l) if the dependant is a spouse,
i. the length of time the dependant and respondent cohabited,
ii. the effect on the spouse’s earning capacity of the responsibilities assumed during cohabitation,
iii. whether the spouse has undertaken the care of a child who is of the age of eighteen years or over and unable by reason of illness, disability or other cause to withdraw from the charge of his or her parents,
iv. whether the spouse has undertaken to assist in the continuation of a program of education for a child eighteen years of age or over who is unable for that reason to withdraw from the charge of his or her parents,
v. any housekeeping, child care or other domestic service performed by the spouse for the family, as if the spouse were devoting the time spent in performing that service in remunerative employment and were contributing the earnings to the family’s support,
vi. the effect on the spouse’s earnings and career development of the responsibility of caring for a child; and
(m) any other legal right of the dependant to support, other than out of public money.
[16] Similar criteria to those under s. 33(8) and (9) have been applied to a temporary spousal support analysis: see Nash v. Olsson, 2012 BCSC 1099 (Master).
[17] Entitlement to spousal support is acknowledged by the Applicant. Therefore, to determine temporary spousal support, the court must firstly determine the income of the parties and then the quantum. The issue of the application of ss. 33(8) and (9) of the FLA and of the SSAGs is considered under the latter heading.
Incomes of the Parties
[18] Respecting the Applicant, the parties acknowledged that the profit-sharing portion of the Applicant’s income would continue to be paid into “The Fund” and that this account would be frozen pending the continuation of the litigation. Therefore, as the profit-sharing portion of the Applicant’s income is unavailable to her, the income for support purposes would be limited to her base income for employment, which is $77,482 USD or $101,170 CAD. [7] Because of currency fluctuations, it is fair to fix the Applicant’s income at $100,000 per annum.
[19] The Applicant seeks income to be imputed to the Respondent based upon the fact that he acknowledges that he has not looked for work and that he is therefore voluntarily underemployed within the meaning of s. 19(1)(a) of the Child Support Guidelines (which criteria have been applied to imputation of income for spousal support purposes: see Rilli v. Rilli, [2006] O.J. No. 4142 (S.C.J.)).
[20] Mr. Cuff notes that he does not even have his high school equivalency. He says that he is exploring career alternatives at this point in time, but that most of his efforts and time during the relationship has been concentrated on the joint venture that he says that the parties had together. He says that his skills are therefore specialized and limited. He says that he cannot easily fit into another job and that it is unreasonable under the circumstances to force him to work at a coffee shop considering the income and lifestyle of the parties and the fact that this would also take time from him exploring future career opportunities.
[21] Income has been imputed on a temporary motion, and on the same basis, intentional underemployment, for which the Applicant seeks imputation of income to the Respondent: see Decker v. Fedorsen, 2010 ONCJ 618, [2010] O.J. No. 5661 (C.J.) at paras. 24 and 25. In that case, Sherr J. suggested that if I find that the Respondent is intentionally underemployed, that I can only overlook that intentional underemployment if “it is by virtue of her reasonable educational needs, the needs of the child or reasonable health needs”.
[22] I have already noted that I do not understand what efforts were made or what is produced to earn the income that is paid to Ms. Rushton. Conversely, I cannot understand what Mr. Cuff did to assist in the earning of that income or the contribution that he made to the joint venture. He says that he set up 847 and then managed the funds received by 847 for both income and dividends. He says that his efforts largely contributed to the earnings of the parties although he never explains the source of the income from BC which pays both the dividends and income to the Applicant.
[23] This is an interim motion for spousal support. Although entitlement is acknowledged, there is little agreement on the basis of the income from which spousal support is to be paid. Because there are conflicting affidavits on Mr. Cuff’s role within the relationship, I have little uncontradicted evidence as to whether Mr. Cuff is voluntarily underemployed. Although he says that he has not looked for work, he says that he is exploring his career opportunities and attempting to address his own lack of education. He says that one of the reasons why he does not have his high school equivalency is the role he took in the joint venture from which he seeks equalization of income. He says that he has health issues that prevent him from working. All of those issues are contested and will require viva voce evidence at trial to determine. In particular, the issue of whether Mr. Cuff should be forced to work rather than actively examine his options and retraining considering the length of the relationship will be a live issue at trial.
[24] Based upon that, because this is an interim motion on conflicting affidavits, I believe that the court should act with caution regarding imputation of income. Unlike the situation in Decker, there has been no questioning in the present case to establish intentional underemployment. Mr. Cuff’s ability to work and his efforts to obtain employment and retraining will be issues at trial. Only a trial judge will be able to make a reasoned determination as to the Respondent’s voluntary underemployment or his ability to work considering his skills and education. I therefore decline to impute income to the Respondent at this point in time.
[25] Finally, we have to address the dividends that are being received by the parties through 847. These dividends total approximately $100,000 per year, although the Applicant led evidence that these may decrease in the future. In 2017, the last taxation year for which returns were prepared, each of the parties declared $46,800 in non-eligible taxable dividends.
[26] At the moment, neither party has use of the dividends. The parties have agreed that they be used to pay joint debts and pay the expenses traditionally paid through the dividends.
[27] The parties have addressed one of those debts, being the car loan for the Cadillac Escalade. The vehicle has been returned pursuant to the order of Mulligan J. made October 8, 2019.
[28] The other major debt that the dividends are used for is the lease on the common residence, which the Respondent now resides in. Those funds are therefore being used to the present benefit of the Respondent. He has not taken steps to sublet or otherwise give up that lease.
[29] As I understand it, the dividends continue to be used to make payments on the joint lines of credit outlined in the Respondent’s financial statement. Other than those debts and the Respondent’s rent, the dividend income provides no benefit to either party as no funds can be released pursuant to the order of Mulligan J. However, I have included this income in both parties’ income for SSAG purposes as each party receives the same amount and the Respondent acknowledges that he does receive some benefit from that income. An accurate support amount under the SSAGs is not possible without including that income.
Quantum of Spousal Support
[30] This is a motion for interim spousal support. As noted above, many of the facts in this case are contested, and the affidavits are at odds with one another.
[31] The Respondent says that setting support according to the SSAGs would do an injustice in light of the joint venture from which the parties derive income. Ms. Cummings argued vigorously that the court should order an equal split of net disposable income (“NDI”) to reflect the fact that this was the status quo prior to separation, and to reflect the fact that the income was derived, not only from the efforts of the Applicant, but from the joint efforts of both of the parties.
[32] I have noted that the affidavits of the parties are conflicting and that is especially so in respect of the roles that the parties had during the marriage and in respect of the income derived from BC. Mr. Cuff says that he worked alongside of Ms. Rushton in earning that income, and that he also managed the finances of the parties after Ms. Rushton failed to competently pay the bills of the parties. Ms. Rushton outlines her duties with BC, and says that she earns the income on her own. The fact that this income has continued since April, 2019, when the income was divided, and since June of 2019 when the parties formally separated, appears to corroborate the fact that the income is earned by the efforts of Ms. Rushton as Mr. Cuff is no longer involved, as far as I know, in that company.
[33] Under s. 33(8) of the FLA, a compensatory claim is described in para. (a) which states that support can be ordered to “recognize the spouse’s contribution to the relationship and the economic consequences of the relationship for the spouse”. A non-compensatory claim is intended to “relieve financial hardship” as set out in para. (d).
[34] The parties differ significantly on the contribution made by Mr. Cuff to the relationship. Both parties paint a different picture in their materials. On the other hand, Mr. Cuff complains about the financial difficulties he finds himself in as his income is now limited and Ms. Rushton is no longer sharing income. There is a clear disparity in the parties’ respective incomes. I am not willing to find compensatory spousal support as a basis of entitlement considering the conflicting evidence between the parties: that is an issue that must be addressed at trial. However, I am willing to find that Mr. Cuff has a prima facie non-compensatory entitlement to spousal support.
[35] That being said, what is the quantum of spousal support to be awarded? As noted, the Respondent requests a division of the Applicant’s income to equalize income that the Respondent says belongs to both of the parties. The Applicant says that the court should stick to the SSAGs.
[36] It is trite to say that on a motion for interim spousal support, the intent is to address hardship or inequity between the parties on a means and needs basis; it is not a place to conduct an exhaustive analysis as to the quantum of spousal support. As mentioned above, this is largely because spousal support can involve a complicated analysis of a number of factors and it is inappropriate to conduct that type of analysis on the basis of conflicting affidavits after one hour of argument on a busy motions day. The court must base its decision on mostly uncontested facts that are either common ground or unquestioned; otherwise, the court must be cautious about going beyond a means and needs analysis in determining spousal support.
[37] This means that the SSAGs become increasingly important at an interim motion, as the ranges are based upon the length of cohabitation and income, factors that are often easy to determine at an interim motion. The case law confirms that the SSAGs should be applied on a motion for a temporary order as in the present case: see M.(D.R.) v. M.(R.B.), 2006 BCSC 1921, 2006 CarswellBC 3177, [2006] B.C.J. No. 3299 (S.C.) at para. 10 and Decker v. Fedorsen, supra at para. 28. In Decker, Sherr J. cites Robles v. Kuhn, 2009 BCSC 1163 (Master) for the following principles concerning an award of temporary spousal support:
- On interim support motions, needs and ability take on greater significance.
- On interim motions, the need to achieve self-sufficiency is of less importance.
- Interim support should be ordered within the SSAG (Spousal Support Advisory Guidelines) range unless exceptional circumstances dictate otherwise.
- Interim support should only be ordered where a prima facie case for entitlement has been set out.
[38] In Fisher v. Fisher, 2008 ONCA 11, at para. 103, the Court of Appeal states that the SSAGs must be treated as a “significant authority” in determining the quantum of spousal support, and that, if the court is departing from the SSAGs, it must provide an explanation as to why. This is confirmed by Sherr J. in Decker where he suggests that the SSAGs should be adhered to barring “exceptional circumstances”: see para. 28, supra. In Redpath v. Redpath, [2006] B.C.J. No. 1550, 2006 BCCA 338, the court went so far as to indicate that an order of spousal support which falls substantially above or below the suggested range could give rise to an error in law, unless a reasonable explanation was provided for the discrepancy.
[39] Section 12.1 of the SSAGs provides for an exception to utilizing the ranges of support in compelling financial circumstances at the interim stage of a proceeding. The general principle, as outlined in Slongo v. Slongo, 2017 ONCA 272, is that, absent exceptional circumstances, it is standard practice for interim support to be ordered within the Guidelines' range.
[40] Although the Respondent failed to provide case law to support the awarding of spousal support to address the issue of joint venture income, there is case law to support a departure from the SSAGs under certain circumstances. For example, in Tasman v. Henderson, 2013 ONSC 4377 (Ont. S.C.J.), the court exceeded the amount recommended by the Guidelines (while also disagreeing with the inputs used by the respondent in calculating the range) in their interim award for spousal support on the basis that the SSAGs underestimated the applicant's needs because of the length of the marriage and the lack of children. It was alleged that the appropriate range was between $600 and $800 per month. The court decided to award $1,500 per month. In Osanlo v. Onghaei, 2012 CarswellOnt 4139, 2012 ONSC 2158, McGee J. departed from the SSAGs but the basis for this was hardship: the children ended up with the husband through what McGee J. described as “high handedness, misadventure or fraud” and the “custodial payor range” SSAG amount was inadequate to permit the wife “an equal opportunity to settle into accommodations suitable for the children.” A review of that case indicates that those circumstances were based upon severe hardship arising from the application of the SSAGs and are therefore not applicable to the present case. In certain cases the interim exception should be invoked in deviating from the SSAGs to do justice between the parties; however, this is not one of those cases.
[41] Courts, have acknowledged, as have the SSAGs themselves, that there may be challenges in inadequately ascertaining precise income figures at the interim stage. Interim support can be adjusted retroactively later at trial if the income figures chosen were incorrect; see Frank v. Linn 2014 SKCA 87 and Stork v. Stork, 2015 ONSC 312.
[42] In the present case, the issue of the nature of the Applicant’s income from employment is hotly contested. Mr. Cuff says that Ms. Rushton does almost nothing to earn the income; Ms. Rushton provided her job description in her affidavit. Mr. Cuff says that the income was really income paid to a partnership called Partini; this conflicts with the correspondence from BC [9] which states that this was employment income paid to her. Mr. Cuff never explains this discrepancy or how and why the income is paid to Partini. Mr. Cuff’s assertion also fails to address why, if this income comes from the joint efforts of himself and Ms. Rushton as to why the income continues to be paid to Ms. Rushton without his involvement or efforts since April, 2019 when the income was redirected by Ms. Rushton. As well, if this was income that belonged to Partini, then how could Ms. Rushton redirect the support as it is acknowledged that she did on April 29, 2019?
[43] Moreover, if the Respondent is correct that he is entitled to the income because of his ownership and efforts devoted to a joint venture, this is a claim to that income through ownership or his efforts which constitutes a trust or property claim. It is clear that spousal support is not meant to address property claims between the parties: see Ross v. Ross, 2014 ONSC 1828 at para. 48 and Davis v. Crawford, 2011 ONCA 294, 2011 CarswellOnt 2512 (C.A.) at para. 60. If the Respondent is requesting equalization of income to redress his inability to access partnership or joint venture income, an interim motion is definitely not the place to do this; that request must be addressed at trial. If money is owed, and an accounting is in order, money owed to the Respondent may be paid from the Applicant’s interest in “The Fund” which will remain in place pending trial.
[44] Finally, the Respondent says that he should be entitled to one half of the income from Ms. Rushton’s employment because that was the status quo prior to separation. It is acknowledged that, during cohabitation, that income was equally divided.
[45] No case law was provided to support this proposition, that the status quo of an equal division of income should be addressed by temporary spousal support. Nowhere is this mentioned in ss. 33(8) or (9) of the FLA; subsection (9) instructs the court to take into account “all of the circumstances of the parties” but never mentions that income must be equally divided where previously done pursuant to tax purposes: paragraph 33(9)(f) is as close as it gets which instructs the court to “have regard to the accustomed standard of living while the parties resided together”.
[46] I agree with counsel that the prior status quo is a circumstance to be taken into account in determining interim spousal support. That differs, however, from an order that maintains that status quo. No one, after separation, maintains a prior status quo; nor is that possible in most circumstances. Income is now being divided between two households rather than one, and it is inevitable that standards of living will drop as a result. Temporary spousal support is intended to address hardship based on the means and needs of the parties, not to maintain an income earned within the relationship prior to separation. The payment of spousal support, whether on an interim or final basis, ought not to be granted purely as an exercise to equalize income: See Robinson v. Robinson (1993), 48 R.F.L. (3d) 265 (Ont. C.A.).
[47] Accordingly, I am determining the support payable according to the SSAGs based upon the Applicant’s base income from employment.
[48] I attach as Schedule A to this decision a SSAG calculation prepared by me using information provided during argument. It takes into account the dividend income received by both parties which, according to the tax returns of the parties, consists of non-eligible dividends. The midpoint spousal support amount in that calculation is $2,188 per month. Low range is $1,875 per month; high range is $2,500 per month.
[49] I take into account the fact that the Respondent receives a disproportionate benefit from the dividend income insofar as his rent is paid through those dividends. The Respondent says that this is a joint debt to be paid from the dividends, but there is no evidence as to the steps taken by the Respondent to sublet the common residence or otherwise get out of the lease. He may have decided to remain in the residence because he was not receiving support or income from the Applicant. In any event, because the Respondent’s rent is paid through the dividends, I have lowered the spousal support amount to less than the midpoint.
[50] The Respondent confirmed that there is no request for retroactive spousal support in this motion.
[51] Based upon the attached SSAG calculation, I am on safe grounds to find that the Applicant should pay the Respondent temporary spousal support of $2,000 per month commencing January 1, 2020. So ordered.
[52] The parties may make submissions as to costs of the motion in writing. Those costs submissions should be no more than four pages in length, not taking into account Bills of Costs and Offers to Settle. Costs to be submitted on a ten-day turnaround to the judicial assistant in Barrie, with the Applicant providing her submissions first and then the Respondent.
McDERMOT J.
Date: January 23, 2020
Schedule A
